Motley Fool Hidden Gems Investing - Retail Winners and Losers

Episode Date: August 17, 2018

Walmart racks up its fastest sales growth in a decade. Nordstrom dazzles. Macy’s slips. J.C. Penney plummets. Home Depot nails it. And Amazon goes to the movies. Our analysts discuss those stories and weigh in on Southwest Airlines and flying miniature horses. Plus, author Jonah Sachs talks about his new book, Unsafe Thinking: How to Be Nimble and Bold When You Need It Most.  Thanks to Slack for supporting Motley Fool.  Slack: Where work happens. Go to slack.com to learn more. Learn more about your ad choices. Visit megaphone.fm/adchoices

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That's why they call it money. The best things in life are free. But you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Chris Hill, and joining me in studio this week, senior analyst Jason Moser, Andy Cross, and Ron Gross. Good to see you, as always, gentlemen. Hey, Chris.

We've got the latest headlines from Wall Street. Author Jonah Sachs has a few tips on how to be nimble and bold. And as always, we've got a few stocks on our radar. But we begin with the newest growth stock in the public markets, Walmart. Shares of Walmart up 10% this week after second quarter profits came in higher than expected. E-commerce sales in the U.S. up 40%. Andy, CEO Doug McMillan and his team crushed it. Yeah, great investments that they're making in their business. Gross stock might be a little bit bold, Chris. But, their comp sales were up 4.5%, which was the best in 10 years. Traffic was up 2.2%. And their pricing was up 2.3%. So, they're really showing some

progress on just getting people to the store and getting them in the right products. But what I really like about it is, as you mentioned, the e-commerce business is accelerating. That was some concern, whether they can actually grow that e-commerce. They're actually having success there. They're making the right investments. They're going to be buying 77% of Flipkart, which is India's largest e-commerce platform. That will probably happen this quarter, coming up. They own 10% of JD.com, China's second-largest e-commerce platform. So, they're making a lot of investments into the e-commerce space, and it's showing up in the top and bottom lines.

Yeah, top line looks good. Unfortunately, there is more to the income statement than just the top line. And we do see some margin pressure coming in here. There's a consistent price war in this space. Everybody's racing to the bottom to lower prices to grab the consumer. Obviously, they're spending a ton of money to invest online. Increased commodity, increased transportation costs are taking a whack out of margins. Operating income was actually down. So, I applaud them for what they're doing on the top line for the sales numbers. But it is only a piece of the story, and there are a lot of costs associated with this business. Yeah, I think Ron makes a good point there.

There is more to the story. I do think, given the narrative over the past five years, it's really just been Amazon, Amazon, Amazon. It is great to see Walmart competing in the space. And frankly, competition makes these companies better, right? If you're going to go up against a company like Amazon, you better bring your A-game. And it seems like they're doing the best they can here, Walmart is. To Ron's point, they are constantly going to be playing that low-price game. And I think that's where Amazon has still a leg up, in that they've given people a way to value their time a little bit differently than we used to. So, it's not always about just having that rock-bottom low price, it's about convenience, it's about

great service. And certainly, Amazon has helped set new standards there, not to take anything away from Walmart. I think they're doing all of the right things. It's just a very competitive space. I mean, they're bringing Ellen DeGeneres, right? So, there we go, the new denim line coming up, sub-$30 price points. But the grocery pickups are now in 1,800 stores. So, to Jason's point, they are making these investments. They are trying to be more relevant, certainly, than they were over the last five years. So, you've got to really applaud Doug McMillan and what he's trying to do there. I'll say it one more time, keep an eye on margins, though, because if you're going to pay 19 to 20 times earnings for a company

like this in a market that's only trading around 17 times, they better start improving those margins. Ellen's generous chasing the denim space. I mean, this has been a denim week, right? VF spinning off the Wrangler and Lee business into their own company, and now you've got Ellen introducing a denim line with, is that Walmart? Is that correct? Yeah, Walmart. Hey, that makes a growth stock right there. Jeans, who would have figured? More retail earnings this week. Nordstrom's second quarter profits came in higher than Wall Street was expecting. Shares of Macy's falling despite second quarter profits also

coming in higher than expected. And JCPenney stock fell to an all-time low after a disastrous second quarter report. Ron, we'll get to Macy's and JCPenney. Nordstrom stock hitting a 52-week high this week, and they earned it. They earned it. I've always thought that Nordstrom was the best in breed here. But it's a tough business and remains a tough business. department stores, they invariably all go out of business or go bankrupt at some point and then reorganize. And we may be seeing that soon with the likes of JCPenney. But Nordstrom, a great job. Best quarterly same-store sales growth in three years. Love to see that. Online sales up 23%. Now total sales, 34% of total sales, which is up nicely

and they consistently are getting that number up. Very important. Comp sales of 4%. That's a pretty big number, both strong in the full-price stores as well as the Nordstrom Rack stores. So they're doing a great job. Stock has severely underperformed the market over the last five years, as all of these stocks have done, but they're still doing a nice job. Right at this very moment, they're doing a nice job. Well, Macy's stock is up about 80% over the past year, and they did everything this quarter that you would want in terms of the report they put up and raising guidance. Was the sell-off in Macy's stock simply a evaluation play there? Because people looked at it and said, wait a minute, we can't push

this thing higher and have it double in a year. The answer is yes. Which is funny, though, because the stock's nine times earning, so it's funny to call that overheated. But they did have a nice run, as you said, from a stock perspective. And they did everything they really needed to do. So, kudos to them for closing underperforming stores and cleaning up inventory and raising prices. You can't ask much more than that. But again, department stores is a tough business. JCPenney has been without a CEO since May. Is that a problem?

It really does seem like a problem when you look at how JCPenney's business is performing. Is it safe to assume that whoever they bring in to be CEO, that that person's main job is to execute some sort of transformation for the business? Not necessarily overhauling it, but essentially preparing it for either bankruptcy or some sort of takeover. Because I don't imagine a CEO coming in and saying, I really want to roll up my sleeves and make this business work. They're taking on water on so many fronts. Agreed. And you could point to the Macy's model and say, just do what they did. Close the stores that are working, keeping the ones that do, clean up the inventory. But it just seems like an insurmountable battle here for JCPenney. We've

saying this for a very long time. They keep losing money quarter after quarter. They have a little spark of light, and then it just fizzles out. I don't think this is bound for a turnaround, probably ever. Home Depot had a rough spring, but everything is coming up roses this summer. Second quarter profits came in higher than expected. And global same-store sales, Jason, up 8%. That is a monster number. Yeah. We talk about all of these retailers existing in an Amazon world and how they're doing it, some better than others. And I tell you, Home Depot is operating as if Amazon doesn't even exist. It's phenomenal what they've done with this business. And I think part

of that certainly is due to the nature of what they sell. I mean, there is something to be said for going to the store and actually seeing what size screw or the lumber that you need, you know what I mean? So, the other part of this business that probably doesn't get as much play is the pro side of the business, the pro segment of the business. Now, we know Home Depot as the business where we go buy a bag of nails or a hammer, whatever. But the pro side of the business, where they're selling to professional contractors, is a very strong part of the business. It continues to grow. And the average pro customer spends $6,000 annually with the store. So, it sounds like a lot, but frankly, they have opportunity

to grow that ticket considerably here in the coming years. Big ticket sales transactions, transactions over $1,000. That is approximately 20% of U.S. sales now. Big-ticket transactions were up over 10% for the quarter. So, they're hitting it on all fronts. The do-it-yourself consumer, the pro-consumer, really killing it online. I mean, just a very well-run retailer, and I think a unique and a bit more of a protected market. Yeah. 47% of their online sales are picked up in the store. I mean, they really have done a great job. And it's big investments. They're in the middle of this three-year investment to really get the digital part of the business set and logistics all set.

So to be able to have that combination of the physical presence and the online presence, that's really worked well for Home Depot. Yeah, the online sales were up 26% for the quarter, so the numbers speak for themselves. Am I the only guy that thinks they need more service in the store? Like, I walk those aisles searching for a guy or a gal, I can't find one. I tell you, it's so much better than it was five years ago. I mean, I think now you go in, it's almost like a Walmart treat right at the beginning. They welcome you in there.

I just need a lot of help, let's face it. So, I need a little bit. Jason, one last thing. When you look at Home Depot stock, it's up about 25%, 26% over the past year. That's including the bump that they had in the spring. Where is this stock in terms of runway? Because in terms of the underlying business, we were talking about this before we started taping, this is as close to a perfect quarter as you could put up. Well, it was perfect. I think in the call, some analysts questioned some of the macroeconomic trends as to, maybe, is this the peak of the cycle there? Are we going

to start seeing some of a downturn there? But I think that when you look at the overall market opportunity and Home Depot's position in the market, clearly the leader compared to a company like Lowe's. I think there's plenty of room for this company still to run. I mean, they're going to continue to pay a dividend, they're going to buy shares back, and they're going to remain somewhat insulated from that Amazon competition in the near run. So, I think it's a great holding. And the stock really isn't all that expensive. I mean, it's about a market multiple. For a quality company like Home Depot, it's a pretty good buy. Up next, the movie theater

experience is getting primed for a makeover. Details next. This is Motley Fool Money. All right, quick shout out to Slack for supporting this week's Motley Fool Money. Slack is a collaboration hub for work. Whatever work you do with Slack, the right people in your team are kept in the loop, and the information they need is always at their fingertips. Teamwork on Slack happens in channels, letting you organize conversations and information around projects, offices, and teams. And because everything you need is in one place, it's faster and it's easier to get things done. When we're planning Motley Fool money every week, a lot of that planning happens on Slack. And you can find out more on how to get your team better connected

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with Jason Moser, Andy Cross, and Ron Gross. Now that Amazon is in the movie production business, it looks like the movie theater business might be next. Reports out this week that Amazon is in the running to buy Landmark Theaters, a chain that operates in major markets like New York, Chicago, LA, San Francisco, and across the river in Washington, D.C. And Andy, maybe I shouldn't be surprised by this, but I'm a little surprised. You can never accuse Jeff Bezos of not looking forward into the future. So, I think, here's my take on this. I think with potential changing regulatory landscape on studios potentially owning theaters and widening their distribution,

I think it's Jeff Bezos and Amazon saying, hey, listen, we have an opportunity to go after another distribution platform. Landmark specializes in the indie and foreign space, which we know that Amazon Prime videos have had a lot of success with. So I think it's Jeff Bezos saying, hey, listen, this is another distribution platform for us. Let's get in before the studios start changing that landscape and buy up asset property for the cheap. And by the way, Mark Cuban, who is a part owner of Landmark, is kind of shopping the business around, too. A million different ways to think about what he might do with it. But I mean, if we just look at one of the biggest complaints for going to the movies today, I mean, it's the price, right? It costs an arm and a leg just to get through the door.

And I think what they really want to do is get those moviegoers through the door so they can sell all the concessions. And concessions are where a lot of the money lies. But to Andy's point, I mean, Amazon has built a reputation as a very credible content producer at this point. And if you can find more ways to reach the consumer, I mean, that's certainly Jeff Bezos' general line of thinking, anyway. When you look at Landmark, this is not a major chain. They've got some good markets they're in, but the amount of money that Amazon would pay would not be all that big, maybe somewhere in the neighborhood of upwards of $100-150 million. That seems like pocket change. I am a little concerned, though, because in

the wake of the Amazon acquisition of Whole Foods, will that overhaul the concession? So instead of popcorn, my options are going to be cucumbers and celery sticks. Yeah, maybe. Good point. You're not getting that buttery popcorn anymore, my friend. Those big, large Cokes for about $10. I mean, Milk Duds don't have a shelf life. I broke a tooth on a Milk Dud in the movie theater once.

Think of those at Whole Foods. Shareholders of Zoe's Kitchen got some welcome news on Friday. Kava Group is buying Zoe's Kitchen for $300 million. dollars. That is a 33% premium of where Zoe's stock had been trading. Good news, Jason? Jason Moser. I think this is very good news if you're a Zoe's shareholder. This is probably about the best you can expect. I mean, if you look at the actual business itself, it's just in a really tough bind right now. Sales simply aren't growing. Difficult to get consumers into the doors when they don't really have a reputation for any kind of product. I mean,

It's just, I think we discussed this earlier in the meeting, like, what exactly do they serve now? Is it Mediterranean? Is it Greek? It's like, Ron, what did you say? It was shish kebab, but it's like it's made by Americans. It's not really authentic. Yeah, that's a good way to put it. If you don't have that angle, then it's very difficult, really, to keep on growing traffic. And I think that's where Kava really shines. And so, combining the two together, maybe that makes sense.

Interesting to me that they're going to be maintaining the separate branding. So, perhaps Kava's management is going to get in there. I think tinker with the menu there at Zoe's Kitchen somewhat. It gives them a tremendous presence there in a number of more states than Kava currently exists. And after all is said and done, you've got a guy named Ron Shaik as the chairman of the new company there. So, I think they'll very much benefit from his experience as well as current Kava leadership. You look at the footprint of Kava and the footprint of Zoe's Kitchen is so much bigger, you don't think they're going to take some of those locations and just flip them into Kava?

I wouldn't be surprised if they did, but based on the language in the release from Zoe's, it sounds like they do intend on maintaining the two brands, at least for now. But that remains to be seen how that ultimately shakes out. Am I the only one surprised, not that Zoe's Kitchen got bought, but at the premium that was paid? Because, Andy, this is a business that's really struggled, and not that they wanted to necessarily get it in the cheapest way possible, but a 33% premium seems high. Yeah, I mean, just based on my self-studies of looking at acquisition prices,

is, if you're not paying more than 30% over some average recent price, getting shareholders on board to sign off on that deal may be a little bit hard, even for a company like Zoe's. So, it doesn't seem like it's a great asset for current investors, but for investors like Kava to pay that price, it may be well worth it. Yeah. And Zoe's is mostly company-owned stores, right? So, they're not having to deal with that franchise angle. I'm sure that's worth a little bit of a premium, but it's it's worth noting that the stock has pretty much just been on a downward spiral since it went public. So, if it's hard to get shareholders

on board if there's not a premium somewhere in the neighborhood of 30%, what does that bode for shares of Tesla? Because the $420 buyout price that Elon Musk was talking about at the time, that was only about a 13% or 15% premium. Yeah, I said it earlier on one of our shows that I think they're going to have to raise that price eventually. Well, it's a bit more of a premium today that's right yeah exactly exactly yeah southwest airlines has revised its policy on emotional support animals starting september 17th you will not be allowed to bring your service or emotional support animal on a southwest airlines flight unless it is a dog a cat or a miniature

horse i'm not gonna lie ron that last one surprised me i honestly thought it was not i thought it was fake news and so i did some research and i was really quite fascinated to learn that it is a real thing the guide horse foundation formed in 1999 to provide miniature horses as assistance animals to visually impaired uh really fascinating i don't understand the airplane where you put the horse on the airplane i'm sure there's well they're miniature horses they're miniatures you stuff it up in the overhead compartment that would be cruelty to animals you can't do that But it is a true thing, and they supposedly make great guide animals, and they're filling an important need. Well, yeah, I did a little bit of research, learned the same sort of thing in terms of mini horses being –

because we think about dogs in particular being guide animals. Mini horses tend to live longer, tend to be sturdier than dogs in general. I don't know. I feel like this opens an opportunity for another airline to go with other pets, because that would be really interesting to me if American Airlines came out, Jason, and said, OK, we're going to go dogs, cats, and guinea pigs. Or alpaca. Rabbits.

Just get a big old smelly, hairy alpaca on that plane and see how people like it, right? What is Spirit Airlines going to do? I mean, they're just warm right now. Ferrets. Exactly. Do you think anyone goes really hard after the millennial market and just says anything? Bring your snake. Bring your iguana.

No chance. No? Allergies and messes. messes haven't you ever seen movie snakes on a plane i mean you can't do that i think we have to go to our man behind the glass steve brodo uh steve uh when you first uh learned about the southwest airlines news uh what was your thought i don't know if you have pets or if bringing an animal on board is something that's of interest to you we have two cats so i am certainly a pet person but these are service animals these aren't pets these are service animals and i think that

it's very admirable of Southwest Airlines to acknowledge that. These are helping people make it through the airport easier and make it through their lives easier. So it's a great thing. Absolutely. But do you think it's possible that maybe there are a few people out there who are abusing this? And maybe if they don't need their cat as a support animal for emotional support, they just want to take their cat on vacation? I'll tell you this. I've never seen anyone that looked happy when traveling with a cat on a plane. People always look miserable. The cat's miserable. They're miserable. Everyone's anxious. It's just not good. Andy Cross, Jason Moser, Ron Gross, guys, we will see you later in the show.

Up next, Jonah Sachs talks about his new book, Unsafe Thinking, How to Be Nimble and Bold When You Need It Most. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Fast Company has called our guest one of the 50 most influential social innovators. Jonah Sachs is the co-founder and CEO of Free Range Studios, a brand and innovation company. And he's the author of the new book, Unsafe Thinking, How to Be Nimble and Bold When You Need It Most. He recently stopped by our office to talk with industry-focused host Christine Hargis in front of a live audience.

And Jonah kicked off the conversation by talking about his background and some unsafe thinking. Yeah, so back in 1999, I started an internet company, basically, to explore this new tool that was coming out, which I thought was going to let anybody share whatever information they wanted, and we wouldn't have to just sit there on our sofas consuming whatever the media was sending our way. And I figured at that time that people would be more interested in sharing messages that they're passionate about. So you'd rather share, save the whales, than buy this cheeseburger, and that maybe social campaigns could actually get this advantage. So we started making these crazy viral videos, these short cartoons. And we were getting like 40 million

views in the years before YouTube even existed. And it was super fun. I was building this creative agency around it and was thinking, okay, I'm totally changing the world. This is great. But as the company grew and we got to be about 40 people, I started getting much more interested in scaling and in predictability and enforcing rules. I wrote a book and became an expert on storytelling and started just having all these answers and very few questions. And I could tell that the world of marketing was changing so fast and we weren't really changing and growing with it. We were just doing the same old thing again and again.

But every day I'd come to work and I was like, I'm going to do something different today. But there was no time. There was too much pressure. Everyone was counting on predictability and I could tell we were going to go over a cliff. But I couldn't figure out how to change. Unfortunately that led me to have to go out and have like 100 conversations with people who were much easier, that came a lot easier to me. started gathering up, you know, what do you do when what you're doing is no longer working? How

do you actually enact change? How do you see a changing world as an opportunity rather than a threat? And in learning all of that stuff, you know, and reading decades of science, I came up with unsafe thinking, this idea of how do you actually change? And I was able to finally change myself, change my company, and then eventually sell my company when I realized that the change that I desired was even more. So yeah, that's where I came from. So unsafe thinking sounds like something I should be afraid of. So why exactly should you lean into unsafe thinking? Yeah. So the idea is that we don't want to be taking risks at all times, just taking on the craziest possible ideas, breaking things for the sake of breaking them. The idea more is that in a world that's

constantly changing, if we're not changing with it, if we're not challenging ourselves to grow and do things that are uncomfortable, we're soon going to be left behind. And actually the most dangerous thing is staying static and pretending that things change is not upon us. So what I talk about in the book is ways that we as individuals and companies can really cultivate intelligent risk-taking, can push ourselves to use the parts of our minds and our cultures that we normally don't want to step into. And basically, how do we get really comfortable with being uncomfortable, seeing that as our growth edge, as a new kind of technology for constant growth and learning. And so, yeah, there's a lot of stories in here of people who've done some really crazy stuff,

like a college president who dropped his pants in front of a riot, rioting students to get them to quiet down and eventually became the mayor of Bogota based on that. I'm not suggesting that we do that every day. But I am saying that non-obvious paths and risk can often lead to openings that staying on the same old tried and true we know will not lead us to. So I love the range of different examples that you have in the book. And perhaps not surprisingly, the stories are all told so well. You know, that story about the mayor of Bogota. And truly, there are anecdotes told from so many different disciplines. You've got basketball coaches, you have doctors. It's truly a modge podge of different creative and brilliant minds. And it, that leads me to wonder,

what was the most surprising interview that you had? Yeah, I guess, you know, you mentioned basketball coach. I might, I might go to that one. I spoke to Steve Kerr, who's the coach of the Golden State Warriors in my hotel hometown is beloved. Maybe he's not, not out here. But, But, you know, I wanted to, I was watching the team succeed so much over the last four or five years. And they play such a creative style of basketball where they are breaking rules and taking chances and having a lot of fun out there. And I wanted to find out, you know, how did he bring that to the team? So, you know, I expected that he was going to have some basketball knowledge for me. But what he came up with, what he told me right away was a story about

himself, which was that when he came up into the league, he was this skinny guy. He was a great three-point shooter, but he thought that he didn't belong in the league at all. He thought he was an imposter, basically. So he would always pass up the big shot when it came to him. And that kind of worked because he had Michael Jordan over here and Scottie Pippen over here. So it always kind of made sense to dish the ball. But one day, Michael Jordan had the flu, and they were in game six of the finals. And so he got the ball. He knew he had to shoot it. He shot it. They won. And he realized that he had wasted so much time and energy feeling like he didn't belong. And when he stepped into the locker room with the Warriors, he said, I'm never going to let these players feel

this way. My first job is not to teach them any new skill or any new strategy, but to make sure that the pressure in this team is off of them, that they feel safe enough to take big risks out on the court. So when you think about the culture of an organization, how exactly do you foster that sense of safety that leads to the unsafe thinking? Yeah, there's all kinds of ways that we can do it. I'll mention a few. The book is kind of full of different things that leaders can do. One of them is, you know, what are we incentivizing? If we're always incentivizing results and always crediting individuals with having a great idea, and that's how you get raises and you advance in the company, people will take less and less risks. And they'll try to kind of fake

results. I tell a story of the sciences in which, you know, 60% of papers that get negative results, studies that don't find anything, get buried. People pretend they never happened. And that's terrible for science. We're doing all these studies finding out that there's no answer there and then throwing them away so other people have to repeat the study. That's happening in companies all the time. People are doing experiments and are afraid to say anything about it and then we keep repeating the same stupid experiment again and again. So when we reward people for taking intelligent risks, when we reward teams not just individuals that reach success, when leaders speak last in a meeting, when a leader will come into a meeting and speak first and set the tone, what

you're going to get is the same old thinking. It's called shared information bias where everyone just feels good repeating what the leader just said. But when a leader draws information from the edges, from those lower status individuals in the group, creativity bursts forth. So yeah, I had a lot to learn actually as a leader from all of this that I heard about not being an MVP of your group when you're the leader, but bringing out the creative MVPs around you. Yeah, it seems like there's a lot that leaders can do in their team meetings to take a step back and use their opening lines to set up an environment where people are actually welcome to do that exact type of rule-breaking and then shut their mouths and listen and hear what everybody else has to say before speaking

themselves. Yeah, there's this fascinating thing that happens where, let's say 10 people get together in a room and two of those people have some unique information that no one else has and then all the other information everyone already shares. This is really common. Well, what's the point of the meeting, right? It's to get those two pieces of information that only a couple people have. That's why you get together. But what happens psychologically is when the leader speaks, an actual amnesia takes place where the person with the outlying information forgets that they even have it. And some fascinating studies show that it's important that everybody writes down what they think they know and what they think they know that's unique. And even if they are

afraid to put it forward to pass it to the person to the left, so it comes out. So like simple technologies like that, which make it safe to say the things that people don't want to hear. something that you spend a lot of time writing about is how it's actually a very good thing to be disagreeable yeah so you know we all want these like nice cultures and it's very important that people as i said feel safe at work they feel embraced they feel valued but there's a difference between respect and niceness and nice cultures tend to actually discriminate against people who are not of high status in a group often women minorities in an organization and creates this sort of monoculture when people are afraid of upsetting each other. It keeps everybody agreeing,

basically. And agreeableness has been found to be one of the highest predictors of non-creativity. So they've done studies of teachers, for instance, and they ask them, how important is it to teach creativity to your students? And they'll say, it's the number one most important thing we can do. And then they'll say, who's your favorite student? And they will always identify a non-creative student as their favorite. Because creative people tend to be less agreeable. And so when When there's a subtle culture of agreeableness being important, creativity starts to shrink. And so I talk about lots of different ways to what I call gamify dissent, to force people to fight it out really hard, kind of like Steve Kerr has them in the arena, and then

come back into a safe environment outside of the brainstorming or meeting session. Things like red teams, where you put an idea out there and it's the job of some of your colleagues to rip it apart in every way possible without ripping you apart, is a great practice, for instance, for being honest with each other and, you know, killing ideas before they get out into the market. And we learned the hard lesson that way. Absolutely. So when you think about some implications for leadership and encouraging people to speak up and to actually listen to the views of people who might have divergent opinions, how exactly can you encourage avoiding bias and leaning on intuition without falling into the trap of biased decision making?

Yeah, there's a lot of work that I did on intuition, which is kind of a well-studied source of our genius. We do all this pattern matching in the background, and we think we know because just 80% of what comes in our brains, we're not really noticing, but all this pattern matching is going in the background. So suddenly, we'll realize something, and that can be the source of our genius. It can also hide all kinds of biases that we have no idea we're aware of. So I tell the story in the book, Silicon Valley investors have been asked and really tracked, how do you make your investments? And they will tell you time after time, it's intuition. I'll look at the business plan. It doesn't matter. I want to meet the entrepreneur. I just know.

And they'll go on and on about it. But they invest $34 in every male entrepreneur for every female entrepreneur they give a dollar to. And so their intuition is telling them that women can't run businesses. The reality is that women tend to do better when they run startups than men. So this This intuition is actually just hiding this biased approach to investing and wasting tons of money, leaving tons of money on the table. Even when they're confronted with this reality, they do very little to change it. So what are the ways that they can overcome this sort of false, biased intuition? One of the prescriptions that's been now tried in Silicon Valley simply means bringing in

different people into the decision-making process. It turns out that these men are unable to change no matter, even after committing to it, many of them. more women onto the team changes everything. Another thing is exposing yourself to situations that are really counter to the patterns that you see every day. Doing things that you're bad at actually creates more creativity. Getting out of that sense that you're an expert really helps opening up learning. There's a study of 200 experts over 20 years. They made 10,000 predictions about the future. They were worse than dart throwing monkeys at figuring out what was going

to happen, you know? And why was that? Well, the more that they appeared on TV and the more that they had esteem and the more that they wrote for major newspapers, the worse that they were. And that's because they started to get entrenched in this idea that the world works this way and my ego is attached to it working that way. And that feels like intuition. Oh, I just know. But if you think you just know and you're no longer exposing yourself to new ideas and to new stimulus, then you are reaching this point at which you become worse than a blindfolded person at making predictions. So we need to constantly educate that intuition by

exposing ourselves to new possibilities, new ideas, by humbling ourselves. I tell the story in the book of this guy, Vinit Nayar, who took over a 56,000 person company that was facing terrible threats. It's an outsourcing company in India. Huge threats coming in because Microsoft and Apple were getting into the space.

And they wanted him to fix the business. He gets up there. And in India, a lot of CEOs are seen almost as emperors on high, you know, he's described, they expect me to have all the answers. I didn't know the answers. So instead of giving a PowerPoint presentation, he gets up and turns on some Bollywood music and he starts to dance and he's terrible and he's like sweating and falling apart and everyone's in the audience starts laughing at him. And then when he's done, he steps up and says, I don't have the answers. I want to know from you guys in the front line what we should do.

And he said that that experience helped him triple the revenues of the company over the next three years because not only did he make himself more human to his team but he got out of that trap of thinking that he actually knew so whenever you go into a situation with that confidence that you already know you are risking that kind of expert blindness that's been really well studied and can be overcome if we kind of question our intuition and question our expertise thinking of ourselves more as explorers than as experts if we can and so it turns out that if you have that mindset of an explorer and you can really come to

embrace the discomfort that comes with being in that uncharted territory, you actually can make a lot better decisions. So the first section of your book is all about courage. So how exactly do people harness these feelings of discomfort and anxiety and fear into something that they can leverage into fuel for their creativity? Yeah, so when I started researching the book, I was really influenced by that old Apple Think Different ad. I don't know if you guys remember, but it was, you know, it says here's the crazy ones, the people basically who changed the world because they know no other way. And I was thinking, oh man, I, you know, I can barely change myself and I'm just not one of those crazy ones. And then I looked into the story of one of

the crazy ones because I was so intrigued by this idea and kind of depressed by it. And I looked at the story of Gandhi because he was one of the first to appear in that ad. And Gandhi, it turns out, was not really one of the crazy ones at all. He's one of the biggest world changers, obviously, the 20th century. But he was so shy that he couldn't even open his mouth as a young lawyer in court. He couldn't even utter a word for fear that he would be discovered as a fraud. He tried to speak to the London Vegetarian Society, couldn't utter a word, got laughed out of London, got laughed out of India, went to South Africa. And in South Africa, he also tried to hide from his fears by working behind the scenes for a law firm. And then one day

he's crossing the mountains across central South Africa, and he gets kicked off a train for sitting in a white man's seat. And he's alone on the platform, freezing. And he realizes that he has always run from his fears. And every time he has, his life has gotten worse and his fears have gotten bigger. And so he calls this the most creative incidents of his life. He says, from now on, things that make me nervous, I'm going to step toward rather than away because it's just not working to stay this way. And what he had hit upon and what actually really worked for him, obviously, in huge ways, what he had hit upon is what now psychologists call cognitive reframing, where we can't stop ourselves from feeling

the fear of the unknown. And in fact, trying to do that, trying to like harden yourself against those feelings tends to only make them worse. But if we reframe those feelings and say, hey, nothing that I've ever done that's been creative has ever happened without me feeling a little bit of fear. And no good idea ever comes along that makes everyone feel comfortable. If we start thinking of fear as fuel for creativity, we can start approaching it in a different way. Leaders who can teach their teams, we're not leaving this room until we come up with an idea that makes us a little bit uncomfortable. And we don't have to do that idea, but we're not going to just consider four ideas that we all feel are safe. I'm not

going to live my life only staying in the zone of things that I know. I'm going to make at least 15% of my time doing things I'm terrible at, doing things that I'm learning. If you want to learn more from Jonas Sachs, pick up a copy of his book, Unsafe Thinking, How to Be Nimble and Bold when you need it most. If you want to learn more from Christine Hargis, check out the Industry Focus podcast wherever you get your podcasts. Up next, a few stocks on our radar.

Stay right here. This is Motley Fool Money. This week's Motley Fool Money brought to you by TD Ameritrade. You're always on the cutting edge of technology And TD Ameritrade prides itself on being ahead of the curve, too. Their latest innovations put their resources and services on the popular platforms that you carry and use every day. Now, to stay on top of the markets, all you have to do is enable the TD Ameritrade skill for Amazon Alexa or message them on Facebook. I've been working with TD Ameritrade for nearly 20 years.

I love TD Ameritrade. Learn more about their commitment to innovation at tdameritrade.com slash innovation. Welcome back to Motley Fool Money. Chris Hill here in studio once again with Jason Moser, Andy Cross, and Ron Gross. Time to get to the stocks on our radar. Ron Gross, you're up first. What are you looking at this week? I got Cedar Fair LP, ticker symbol FUN, F-U-N. Country's third largest amusement park operator, profitable recurring cash flow, regional monopolies, 6.7% dividend yield. Now, That's pretty fancy, but it's also because they have been struggling a little bit lately.

Earnings were impacted by bad weather, higher wages, some slowing attendance. But I think in the longer term, shareholders will be quite rewarded. And that almost 7% yield is pretty good. Steve Broido, question about Cedar Fair? Ron, what do you do with a seasonal business like Cedar Fair? In the winter, they can't operate. What do you do? That's true. They're actually trying to increase prices and kind of spread out the seasonality

by offering membership passes, more like a membership model than a one-time season ticket purchase. And we'll see if that helps smooth out a little bit. But you are correct, it is for sure a seasonal business. Jason Moser, what are you looking at? Yeah, on the heels of Home Depot's quarter lows, ticker LOW, earnings report out next Wednesday, August 22nd. I'm going to be very interested to see management's narrative on the back half of the year here. We've got Marvin Ellison, the new CEO, over from JCPenney, of course, and this will be his first quarter. Very service-oriented. I think he'll do a lot of great things with the business. We talk about the big aging home population out there. By 2020,

54% of the homes in this country are going to be 40 years or older. So, plenty of opportunity. Lowe's is a smaller company than Home Depot right now, but I think over the next five years, there's a potential better reward scenario out there for Lowe's than perhaps Home Depot. Steve, at the end of the day, isn't this just a proximity play? Don't people just go to what's closer? If Home Depot is closer, I'm going there. If Lowe's is closer, I'm going there. You know, I do agree with that, Steve. Now, I do find some people are a bit more loyal to one brand or another, but I think that's really why you always find a Home Depot right next to a Lowe's, anyway. Andy Cross, what are you looking at?

Intuit, the maker of TurboTax and QuickBooks and Mint personal software applications, reports next week they had a monster growth in their QuickBooks online, grew 45% last quarter. and their QuickBooks ecosystem is up 41% on the revenue side. That's like payments and payroll. So will that keep accelerating into the year? And the ticker? I-N-T-U. Steve?

Do you ever see a situation where QuickBooks incorporates all its products into one suite? They're starting to do that with their new Turbo app, which is like Mint and TurboTax. It combines your personal finance life all together. Five million users. Will that continue to grow? Steve, you got a stock you want to add to your watch list? I might take a look at Intuit. All right.

Andy Cross, Jason Moser, Ron Gross guys thanks for being here our engineer is Steve Reuter our producer is Matt Greer I'm Chris Hill, thanks for listening we'll see you next week