Motley Fool Hidden Gems Investing - Turkey Stocks, Humble Pie & Malcolm Gladwell

Episode Date: November 27, 2015

In the spirit of Thanksgiving, our analysts talk turkey, share some stocks they're thankful for, and dig into some humble pie. Plus, Motley Fool CEO Tom Gardner talks with Malcolm Gladwell, author of David and Goliath: Underdogs, Misfits, and the Art of Battling Giants. Learn more about your ad choices. Visit megaphone.fm/adchoices

When WestJet first took flight in 1996, the vibes were a bit different. People thought denim on denim was peak fashion, inline skates were everywhere, and two out of three women rocked the Rachel. While those things stayed in the 90s, one thing that hasn't is that fuzzy feeling you get when WestJet welcomes you on board. Here's to WestJetting since 96. Travel back in time with us, and actually travel with us, at westjet.com slash 30 years. Chris Hill, joining me in studio this week for Million Dollar Portfolio,

Jason Moser and Simon Erickson. And for Motley Fool Deep Value, Ron Gross. Good to see you. as always, gentlemen. It is our Thanksgiving special. We will give thanks for some stocks and we will call out just a few turkeys. Once again, we blow all of our budget on that one sound effect. O' Truly worth it, though. Totally worth it. We're going to hear from best-selling author Malcolm Gladwell, and we will dip into the Fool mailbag. But let's start this week with a serving of humble pie. Let's just go around the table. We're going to have our year in review special in in a few weeks, but let's take a moment, look back on 2015, Ron Gross, a story or a stock

that you were wrong about. This is painful. It's a stock and it's Aeropostale, A-R-O. Chris, let me tell you a little story. Back in July 2011, I recommended the stock at $18 a share, and then I recommended it again at $12, and then again at $16. The is now $0.60 a share, market cap of only $48 million, in serious danger of being delisted unless they do something like a reverse stock split. Business has deteriorated during the last few years. Things are not likely to get much better. Some may think of it as a value investment, but boy, they are in serious trouble, burning through cash. Balance sheet isn't as strong as they need it to be, in light of the fact that they're burning so much cash.

So it's been very painful. And actually, I'm quite sorry I ever recommended the stock, and I should have really thrown in the towel long before I did. We've talked before, teen apparel is a really, really tough space. It sounds like, given the market cap, that maybe someone buys them for ... It could be. Our thesis in the first place was that cotton prices were going to come down and the economy would improve. And that's largely happened. But you know what, If you don't sell stuff that people want, it doesn't much matter, and they just don't have the right merchandise in the stores. Jason Moser?

Well, let's continue the retail theme, shall we? Coach, you sly dog! You know, this was one where we really thought that they were going to be able to turn things around. They had a new designer in there, Stuart Bevers, a new CEO, and we felt like they were going to be able to make that move back to affordable luxury. The problem is, they simply weren't. They started cutting prices, they started offering more deals, they started recognizing dwindling traffic in their stores everywhere. Really, they have seen sales basically fall off a cliff since then. Their attempt to become more of a lifestyle brand has really fallen on deaf ears, so to speak. It's one where, at the beginning of

the year, we were kicking around an MDP, whether we should hang onto it or whether we should get rid of it. Really, all of the signs were pointing towards, let's go ahead and get rid of it, and I still own a handful of shares to date. Really, I keep them as a reminder of what I learned from Coach Chris. I took this lesson one step further and applied it to Michael Kors, and I gave Michael Kors the thumbs down based on these lessons I've learned. That's actually worked out very nicely. The problem is, it was in caps and it wasn't with real money, so I really haven't gained any more than some education from the whole process. When we don't get what we want, we get experience. So, there you go. Simon Erickson?

Chris, I'm going to change themes from retail to 3D printing. My stock is X1, ticker X-O-N-E. We brought this to the Rule Breaker scorecard in May of 2013. We liked the idea of 3D printing with metals for industrial customers. They had a great license technology from MIT. They were opening all these new service centers around the globe. They had a lot of momentum behind them. But unfortunately, they just didn't sell any of the machines. They're definitely not enough to quantify the investment in them. X1 was actually losing more free cash flow on a yearly basis than they were making in revenue, which tends to look bad. We think this was a technology that was just way too far ahead of its time, and wasn't getting

any adoption. So, we sold it from Rule Breakers in August, more than an 80% loss to the S&P on our scorecard. Well, this segment was a downer. I'm so depressed. We're going to pick things up. I know long-time listeners are waiting for us to get to the stocks that are turkeys, just so our man behind the glass, Dan Boyd, can have some fun with the sound effect. But, quickly, one stock that you're thankful for in 2015. Really thankful for Disney. A wonderfully run company, I'm sure everyone knows it. Bob Iger has done a great job. I'm not only thankful for what it's done for my portfolio,

I bought it back for my kids back in 2002 at $14. It's now $117. It's an 8 or 9 bagger. So, it's been great from a profit perspective, but even better from a bonding experience with my children to teach them about the stock market and to show them what it means to participate in the capital markets. Nice. Jason? You know, I was thinking about going with Disney. Good call there, Ron. I'm going to have to at least call out a runner-up here in Zoom. Zoom is a company, money transfer business we've talked about before. They were acquired this year, not before we were able to get into MDP for at least a short amount of time, and our 12% gain outshone the market's

decline of 6.5% there. So, I'm very thankful for Zoom. And instead of Disney, I'm going to go with Amazon. Amazon has had a tremendous year. Shares have more than doubled. And I think we're going to witness another great holiday season from Amazon as they just continue to fight to become the world's most customer-centric company. And I really appreciate Jeff Bezos lifting the hood on AWS, Amazon Web Services, really understanding the power that that business has and how it's going to play such an integral role in the growth of this company for years to come. Simon? Hey, good choices, guys. But I've got to go with a company that's really going

to change the world here. This is Illumina, I-L-M-I-N, a company that makes genomic sequencing machines. What that is, is it helps biotech companies look at the DNA level at tumors and cancers and illnesses and some of the most serious life-threatening diseases out there. They're helping these guys make better drugs and oncologists improve treatments, really improving healthcare as we know it. It's also been a great investment, up over 2,000% over the last decade. I've got to go with the other guys, because I don't even understand that. I think he made that up. Two numbers.

Dan Boyd, can you hit us with the sound effect, just because we paid so much money for it? Alright, the stocks that are turkeys. The turkey stocks. Everyone loves a stock recommendation, but not every financial show out there is going to give you stocks to avoid. Ron Gross, what's your turkey? This pains me, but I think I would have to avoid the container store, TCS. Stock hit a high of $43 in December 2013, following its $18 per share IPO the month before. Shares now stand at $10 per share. They run the company quite well, and they follow the principles of conscious capitalism, which we're big fans of, but they're just struggling. There's no

real competitive advantage besides their culture, and operating results keep deteriorating, and I don't see how they're going to pull themselves out of it. So, that's a turkey for me. Do you think a year from now, it's still a public company, or do you think they somehow engineer a move to go private? They could engineer back private. As we said, they haven't been public for very long. They're still in growth mode. They're going to open up 10 new stores this year. They're not really playing too much of a defensive posture, so they could go private. Now, Ron, we've heard Kip Tyndall talk before about maybe offering up this guide

and this transparency, quarter in, quarter out, guiding Wall Street as to what to expect from these guys. I think he's seeing the perils of that. I've heard them talk before about potentially just going without offering any guidance at all, sort of a la Berkshire Hathaway or Markel, companies like that. Do you think that would be a good thing? Do you think that could at least buy them some time and help create the correct expectations? That could happen. They'll probably be abandoned by the sell-side research community if that happens, which could hit the stock in the near term, but it might be okay in the mid-term. Sure.

Jason Moser, you got a turkey? I've got a lot of turkeys, Chris. I'm going to go, again, runner-up here. Simon talked about X1. I'm going to talk about 3D printing in general. I think all of these names, 3D Systems, Stratasys, X1, these are all big turkeys in my book. Unbelievable hype that went into these names. The market bid them up beyond the stratosphere. I think that was really putting the cart before the horse, really understanding the implications of this technology. There really are no consumer implications of this technology, so to speak. I think it's better served in the industrial capacity. And so, we've seen a lot of investors, unfortunately,

get hurt there. I don't see this coming year as any reason for investors to be terribly optimistic about them. But a more recent turkey, I'm going to have to call out Urban Outfitters here. I mean, teen retail, retail in general, is pretty difficult. I don't know that the solution is to buy a pizza joint, Chris. But you don't know it's not? I mean, it's not like they're IKEA, and they're offering those cinnamon buns and meatballs as you tour through Swedish furniture heaven, but golly, I cannot make heads or tails of this acquisition. I don't think it's going to work out very well. I heard them

throw around the lifestyle word in their call, thinking they were going to bring these two companies together, and it was going to be sort of a lifestyle experience. That's code for get the hell out of here. We saw that back in the 90s when Starbucks came out and talked about how they were no longer a coffee company, they were a lifestyle company, and the stock dropped about 30% in one day. Yep. I don't see any reason for Urban Outfitters to truly benefit from this. I would not be looking for a turnaround anytime soon. Simon, you got a turkey on your scorecard?

Chris, my turkey is Nuance Communications. Thank you, Dan. This is a company that was really big in voice recognition software. They got a big hit initially with Apple for the Siri Assistant back in 2011, but then just didn't really go anywhere after that. Google Voice used an alternative technology, Amazon Echo used an alternative technology, and then even Apple took some of the tech talent from Nuance and developed their own in-house solutions. They've just made poor acquisitions that aren't fitting with their core competency, they've got a lot of long-term debt, and they're paying out a lot of stock-based compensation. The triple threat of those, that's my turkey for the show.

I've got to say, I'm a relatively new adoptee of the Waze app for directions. Very helpful. I love that they have so many choices in terms of the voice that you get. Nothing says safety like having people tweet the position of the road while driving. Have you gotten the Arnold Schwarzenegger one yet? I heard that. I couldn't believe it. No, I haven't done that one yet.

I personally prefer the Samuel L. Jackson. Oh, nice, nice. We've got a couple minutes left. Let's dip into the Fool mailbag. Radioatfool.com is our email address. Radioatfool.com. From Bill Henning in Rugby, North Dakota. God, what a great name.

That's a pretty good name, yeah. The long-term investor in me wants to invest in Chipotle after this recent E. coli event and never look back. After my recent visit, I find myself hoping that Jack in the Box spins off Qdoba because they have my burrito vote. I'm curious to hear your thoughts on Chipotle as a stock and their brand damage from this outbreak. Jason, I'll start with you. Sure. We've said it often, I think, that this is part and parcel of the food business. If you are in the food business, you're going to witness something like this at some point in your lifetime. And it's not so much the incident, it's about how the management team behind

it all reacts to it. Unless, of course, that incident keeps on happening, and then maybe you have to question bigger things. I think that what we're seeing here is obviously very proactive management that will continue to deal with this appropriately. Chipotle is very good about trying to get these things resolved and resolved quickly. And they are very customer-centric. If you have just a bad experience and you send their customer serve as an email, they tend to hook you up with a free burrito just to say they're sorry. These guys really take this stuff seriously, and I think that they will be able to get past it. We have to remember, this is a 21-year-old company, 22-year-old company. They have the

growth out in front of them to go on for another 20 or so years growing. There still is a lot of story left to tell here, and I think it's a wonderful investment even today. The key was in the first sentence, long-term investor in him. I think that's key. Ignore the volatility, even if this continues to get worse. Hold it for years and years to come, and I think it'll be fine. Yeah, I think a lot of the headlines are going to focus on the same-store sales, just for this quarter. Because, necessarily, if you're shutting down, what was it, 50 restaurants now? You're going to see a short-term hit there. But I agree with these guys, it's going

to be the longer-term moves of management that's really going to matter for investors. Pretty significant drop. Fell nearly 20% in the past month, but it is starting to bounce back a little bit. Yep, yep. Alright, Jason Moser, Simon Erickson, Ron Gross, guys, thanks for being here. Thank you, Chris. Coming up, we'll revisit one of our favorite conversations. Motley Fool's CEO Tom Gardner talks with Malcolm Gladwell, bestselling author of David and Goliath, Underdogs,

Misfits and the Art of Battling Giants. Stay right here, you're listening to Motley Fool Money. Welcome back to Motley Fool Money, I'm Chris Hill. Motley Fool CEO Tom Gardner recently sat down with bestselling author Malcolm Gladwell to discuss his new book, David and Goliath. Malcolm, what would be great is just to have you start by, first of all, thank you so much for coming and spending time with us. Just outline the overall premise of the book. Well, I was interested in a book in describing in asymmetrical conflicts, or more generally

in this notion of, is our understanding of what an advantage is accurate? and that's the theme that runs throughout the whole book so if our understanding of advantage what an advantage is is so accurate why does the weaker party in a war win as often as it does because the weird thing about if you look at histories of warfare is that the um the quote unquote underdog the much smaller party in any kind of conflict wins an astonishing number of times, which suggests that maybe we're fixating on the wrong variables in explaining conflict. And then I run with that idea and talk about schools,

and education, and dyslexia, and all kinds of entrepreneurialism, and all kinds of things along those same lines, wondering whether our kind of intuitive accounting of these things is accurate. What I'd like to do is just spot up some of the characters, some of the narrative of the book, So you can just tell maybe a couple, short little tidbit

about each one. So why don't we start with Vivek. And since I'm going to mispronounce names, why don't I have you pronounce the full name? Vivek Ranadeev, who is the guy who founded Tipco, a software company in Silicon Valley. He's the one who got me rolling on this, because I ran into him at a conference once.

And I really had no idea who he was. This is a problem that I have that I can't. I have very, very poor facial recognition. In fact, parenthetically, I once was at a dinner at some conference, sat next to a guy for the whole dinner. And I thought he was a graduate student. And I made him discuss Michigan State basketball with me the entire time.

And I discovered at the end of the conversation that it was Larry Page. And it never, you know, someone was like, do you realize you talked to Larry Page? I was like, that was Larry Page? I thought he was a graduate student. So I'm bad at this. Anyway, I run into this guy Vivek,

and I start talking to him, not realizing that he's the head of TIBCO, about his daughter's basketball team. And he had coached, just finished coaching his 12-year-old daughter's basketball team. And Vivek, being from Mumbai, doesn't know the slightest thing about basketball. And so he went to watch basketball

to educate himself on this. and concluded that the way Americans played basketball was utterly insane. He didn't understand why you retreated after you scored. Why do you run back to your own end and wait for the other team to come up to bring the ball up? I mean, sometimes people play the full court press. But his whole point was, why wouldn't you

press all the time? Particularly if you're the weaker party. If you're a weaker party, why would you allow the other team, which is better at shooting and passing and scoring than you to shoot, pass, and score more quickly than they would otherwise? Why wouldn't you try to stop them from doing the thing that makes them good, right?

And particularly when you're talking about 12-year-old girls who's, you know, he realized if you play the folklore press with 12-year-old girls, they won't even get the ball inbounds. So his team, and furthermore, he realized that his team that his daughter was playing on was a team of girls from Silicon Valley. They were the daughters of people like him.

In other words, these were not girls who went home every night and shot baskets. They were girls who went home at night and dreamt about becoming marine biologists. They had no talent whatsoever, basically. So he gets these girls together. And he says, look, I don't know anything about basketball. You have no talent whatsoever.

It's pointless for us to shoot, dribble, do anything. What we're going to do is get an insane shape And I'm going to teach you how to play the most aggressive form of the full court press. And so they start winning games by scores like 6-0. And they go all the way to the national championship. Now, the fascinating thing about that story is that A, it's the rational strategy if your team sucks.

Right? In fact, any team that is a decided underdog in any basketball contest ought to play the full-court press, even though there is a chance if the other team can break the press, you're going to get blown out. But his point is, so what? You're going to lose anyway, right? Your only chance of actually winning

is to do something radical. So interesting thing number one is, why then do so few underdog teams play the full-court press? Why is there an unwillingness to follow a strategy that is in your best interest? And the answer is, because it's hard because people don't like it. And Vivek, people didn't like Vivek when he was coaching his team.

Coming up, Malcolm Gladwell shares some surprising thoughts on choosing a college. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Let's rejoin Motley Fool CEO Tom Gardner's conversation with best-selling author Malcolm Gladwell. Let's hear about Caroline Sachs. Caroline Sacks was this pseudonym of, I got really interested in this literature on what's called relative deprivation. And so the question is, if you're choosing a college, do you want

to go to the best college you can get into? Everyone says you should. But there's reams and reams and reams of educational data to suggest actually that's not a good strategy at all. With some exceptions, you shouldn't go to the best school you can get into. You you should go to the school where your chances of finishing in the top third of your class are greatest. The psychological costs of being at the bottom of any class, particularly if you're in a competitive field like science, math, or engineering, are so overwhelming that it's too risky. If you really want to get a science degree, you should go somewhere where you can feel smart.

So Carolyn Sachs is a girl who was really good at science, got into Brown, went, because everyone said, that's the best school you should get into, got to Brown, dropped out of science because she looked around at the other brilliant kids in her class and thought she couldn't do it, and realized belatedly that she was just in this absurdly elite environment.

By any real world measure, she was good at science. And had she gone to her safety, University of Maryland, she would today have the most valuable commodity in the marketplace, a science degree. So that's a case where, again, our obsession with a certain kind of advantage, in this case prestige, completely distorts our rationality. DAVID ROCKEFELLER JR.: David Boies, the well-known lawyer,

and his story to his journey to the law. DAVID ROCKEFELLER JR.: He's dyslexic. He reads, at most, one book a year. And he is America's greatest trial lawyer. When I heard that, I was like, whoa. So I went and talked to him. I was like, how do you even get through law school if you can't read?

I mean, you can read, but really, really slowly. And this fitted into this larger theory of if dyslexia is such a terrible problem, then why are such an extraordinarily high percentage of successful entrepreneurs dyslexic? And the answer is that some portion of dyslexics compensate for their disability in ways that leave them better off.

So Boies said, I got through school by doing two things. I developed my memory to the point where if you say something, I'll always remember it. Secondly, I learned how to listen. So in law school, he would sit, no paper, no pen. He would sit in the front row, focus on the professor, commit everything the professor, listen to everything the professor said,

and commit everything the professor said to memory. He gets into a courtroom. All of a sudden, he's a dynamo. In day four of the cross-examination, he can say to you, wait a minute. On day one, you said X, Y, and Z. Now you're contradicting yourself. He's that guy, right?

And that's not something he's born with. It's something he developed as a result of being denied the ability to read fluently. And you can make the same argument for entrepreneurs, that deprived of the ability to succeed conventionally in school, you are forced to delegate, right? I must have interviewed 10 very successful dyslexic entrepreneurs, every single one of them.

What do they do in first grade? Identify the smartest kid in the class and make friends with them. Of course, how else are you going to get through school? They also, by the way, all cheated, which I didn't go through in my book. But I was actually fascinated by this. But it's not cheating.

Cheating, most of the time, is where I don't want to do the work, so I take a shortcut. I don't really care about school. I have a contempt for it, whatever. These guys care passionately about school, but they can't do it constitutionally. And they care so much that they say, you know what? I have to stay in school.

I am going to come up with strategies that allow me, someone who is constitutionally capable of reading easily, to continue to flourish. And so they cheat. And at one point, I had a whole chapter on the cheating techniques of successful dyslexic entrepreneurs, but I left it out. ERIC SCHMIDT- Let's hear about Wyatt Walker.

ERIC SCHMIDT- Wyatt Walker, my favorite character in the book. So the question is, Wyatt Walker is Martin Luther King's shadowy, less known deputy. He's the fixer. He's brilliant. So King is like the saint, running the show. Walker's behind the scenes.

And the question in the chapter on Birmingham, what happens when King goes to Birmingham to take on Bull Connor, the climactic event of the Civil Rights Movement in 1963? And the question is, if you have been oppressed for 200 years, what do you learn through that process? What are the lessons that you, if you're smart and adaptive and resilient, what do you take home from being kicked around for 200 years?

And the answer is, you get really, really, really, really clever. And you learn how to play tricks. King in Birmingham has nothing. He's got no money. He's at the lowest ebb of his, he's just gotten schooled in Albany, Georgia. He's being denounced by everyone, including the black press. he starts to hold marches in Birmingham at the beginning and 12 people show up. Bull Connor is looking at him and laughing. He doesn't even bother to send his cops out after King because King's

so pathetic. And Walker proceeds to play a series of tricks on Bull Connor that have the effect of defeating him. And I won't go through all of them, but my favorite is actually the best one is the one I, I'm not going to ruin the chapter for you, but I'll tell you the first one. So they have 12 people marching against every day in Birmingham, which is ridiculous. It's nothing. One day they're arguing in the church before they go out on the march, and they get delayed. And what happened is that after work, all of the African Americans who worked in downtown Birmingham would come to 16th Street Baptist Church and just hang out to see what was going on. So they're delayed until after work has got out. So they send their march out with

12 people. And the next day, Walker reads in the press that 1,000 people marched in Birmingham, Alabama. And he was like, 1,000? We only had 12. And he realizes, oh, wait a minute. To the reporters, they can't tell the difference. A black person's a black person. They can't tell the difference between someone who's just a bystander and a marcher. So he's like, oh, duh. We're always going to march after work now. And so in the press from then honest like 1200 people marched yesterday in Birmingham he's like we had a dozen right and everyone is fooled even Bull Connor is like whoa all these and a lot of the this this hilarious kind of the story builds from there but a lot of what people assumed were protesters in Birmingham

were always bystanders some of the famous photos of uh the of the hope of the um the firemen turning the water hoses on protesters? We're not protesters. Wyatt Walker figured this out. They were bystanders who were really hot. It's Birmingham. Who went to the police, to the firemen, and said, turn on your hoses.

We're really hot. So then Wyatt Walker had all the photographers line up, take these photos, and then he said, oh, look what they're doing. This man totally outsmarts Bull Connor. I mean, it's just a textbook case of how just because you've got nothing doesn't mean, it's the same lesson as Vivek. Just because you've got nothing doesn't mean you have to roll over and die. There's all kinds of means available to you.

Use what you've got. You've got to use what you've got. So we're outside the status quo, and we turn for expert advice. And I want just a little riff on that in the form of Roger Craig, San Francisco 49ers running back, and his sister. so in other words vivek yeah is outside the status quo and but he he probably couldn't have pulled that all off by himself without turning to one of his employees yeah so it turns out yeah going back to the story of vivek and his girls basketball team turns out that roger craig works for vivek and roger craig's daughter uh was a an all-american

basketball player at duke so he did you know he was not completely he recognized the fact that And he only really knew cricket, and basketball was a little bit of a foreign thing. So he knew. But he also brought in, Craig's very interesting, actually, as an advisor, because the whole theme of Vivek's basketball experiment was to substitute effort for skill. And his argument, I think it's a very accurate argument.

And in many domains, effort properly expressed is an adequate substitute for skill, more than an adequate substitute for skill. And that's what, if you know about Roger Craig's career and about him, that's his whole MO. He's an effort guy, much more, he's also a very skilled guy, but the thing that set him apart was an extraordinary work ethic. Roger Craig has run seven marathons since retiring as an NFL running back. Most NFL running backs can't walk after they retire, let alone run I mean, so he knew what he was doing, in other words. He was bringing people who reinforced this really sort of central notion,

which is that if you're willing to really work, that can make up for a lot of deficiencies. So third factor, you don't overplay your greatest strength. I phrased it that way from your discussion of the inverted U-curve and maybe explain that concept and see if that's a... Should a David, even though he has a strength, not think about overdoing it, or is it he's still on this side of the U-curve and should be anchoring hard on his strength

as far as he can take it? Yeah, the Inverted U is a chapter where I talk about how I think one of the kind of mental models we use to describe relationships between resources and outputs really leads us astray. So we have this notion that if a little bit of resources, money, makes the problem better, then a lot of money will make the problem, best of all, go away the most. And the answer is no.

In most of the things that we, of situations where we look at relationships between what you put in and what you get out, the curve does not look like that. The curve looks like that, or rather the curve looks like a U. that in the beginning things get better and then they flatten out and then they get worse. So I use the example of class size. It is absolutely the case that if classes are very large and you make them smaller, kids will do better.

But then there's a long stretch between probably the high 20s and the low 20s where you could make a class smaller and you will see no effect on kids' performance. And if you go too far below 20, kids are worse off. There's really interesting and compelling evidence of this, that it is not a good thing for a child to be in a class with 14 children, 14 other students. One, you cannot get a discussion going with 14, not enough voices in the room. Two, one bad apple can totally ruin a small class because there's nowhere for that person to hide, right?

And thirdly, that children who are struggling, what they need most of all is not more attention from the teacher. What they need most of all is another person, a peer, who is learning at the same pace as they are so they don't feel marginal and isolated. You need to have someone who's asking the same questions, struggling with the same problems. If a class gets too small, the struggling kids are just wiped out. And that's something, you know, a lesson that is so routinely violated. You know, I made fun of private, expensive private schools in my book because, I'm sorry, they deserve it. They take $50,000 of your money and they boast to you that your kid is in a class with 12 other students. Whoever said that's a good thing, right?

All they're doing is justifying the fact that they spent, took 50 grand of your money. And they have 20 Steinway pianos. That was the Hotchkiss School. Where you, I thought, brilliantly pointed out that a school like that is often serving its primary customer, which is the parent, not actually the outcome for the student. It's to impress the parent that we have the very best of every piece of equipment times 10. And by the way, where is it written? I even find the whole notion that the point of a classroom is to maximize the attention that a student gets from a teacher is insane. there a student has to go through extended periods where they are forced to solve the

problem in front of them by themselves that's called life right the teacher should be there for when you are truly stuck and also should be there to get you to the point where you can solve it on your own it is not a good thing to have a teacher hovering over your shoulder at all times that's debilitating so it goes this idea that too much we so often make the mistake where we push our use of resources well past the point where they are useful. Coming up, Malcolm Gladwell talks about the attributes of a great leader. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Let's get back to Motley Fool CEO Tom

Gardner's conversation with bestselling author Malcolm Gladwell. I want to talk about the leaders that set up cultures and throw three adjectives at you from the book. Maybe I'm slightly tweaking the wording, but open-minded, persistent, and disagreeable. Why are those three important to find in a great leader? Well, openness. So these are some wonderful works been done on sort of innovators recently. And they have stressed the kind of, they've looked at what is the kind of prototypical profile of an entrepreneur, innovator, leader. And the argument is they are, the most obvious one is that they are open, meaning they are creative.

And that goes without saying. You have to be able to be someone who considers all. The second thing is that you must be conscientious in the psychological sense of that word. And so there are five basic character traits. Conscientiousness is one of them. Are you someone who can follow through on your ideas? Now right away, we have an interesting situation here, because there are lots of people who are open,

and there are lots of people who are conscientious. Those that have both those traits are rare, right? You know, I can find in any coffee shop in Brooklyn lots and lots and lots and lots and lots of creative people who can't finish their screenplay. I can also find in any law firm in America tons and tons of conscientious people who we don't want to think outside the box.

We want them inside the box. They're not creative. But that overlap is rare. And then add to that the third most important one, which is disagreeable, which is you cannot be someone who requires the approval of others in order to do what you intend to do. And that's crucial because, and that's the hardest of the three because we're hardwired as human beings

to want the approval of our peers. I always remember when I was writing my book, Blink, I hung out with that guy who studied marriages. And he was talking about the one emotion that a marriage cannot survive in the face of is contempt. Because contempt is the emotion of exclusion, that if your spouse argues with you, they are including you. They're saying, I care about you enough

to want to work this out. When they are contemptuous towards you, they're saying, I'm done with you. And as human beings, we need that kind of approval so much that that can end a marriage. Well, the really great entrepreneurs or innovators or leaders at some key moment as they are putting forth their vision need to be disagreeable.

They need to not need that kind of approval. Because the one thing we know is that there's always a moment in the birth of any great idea when the consensus is it's crazy. Find me a transformative idea that was not denounced and criticized at some key moment during its gestation. We have to close to let you get on your way. But could you just close by sharing a little bit about how

we should think about our disadvantages in life? Anyone in the room that sees, I have this weakness, I have this flaw, I have this thing that's held me back, or this shortcoming, or I see it in my child, I see them struggling with this, how should we think about disadvantages? Well, it is a cliche, but as learning opportunities, But you can learn by capitalizing on your strengths or you can learn by compensating for your weaknesses.

The compensation path is far more difficult, it's far more rare, but it's way more powerful. The things you learn as you are working around or through adversity are lessons that are far more deeply felt than the things you learn because of your strengths. And so I chose dyslexia in my book for a reason, because there are just so many examples of people who refuse to deal. That is just about the most serious impediment you can throw in the path of a child.

And the idea that there are lots and lots and lots and lots of really, really successful people who, when faced with that impediment at the age of six and seven, just were undaunted by it and just went about their, just found another way to kind of go about the business of getting through school and then ultimately through life. That to me is such a beautiful example

of how we radically underestimate our ability as human beings to deal with adversity. I mean, I think we're much better at it than we think. Malcolm Gladwell's latest book is David and Goliath. It is already a bestseller, so go out there and check it out. 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. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.