Motley Fool Money - David Gardner, The Case for Rational Optimism

Episode Date: January 11, 2025

You don’t have to look far to find a lot to worry about. But, a long-term bet on negativity is a bet against history. David Gardner is a co-founder and Chief Rule Breaker at The Motley Fool. Ricky Mulvey caught up with David for a conversation about: - Why buying and holding works. - Rational optimism. - The future of space travel. Check out David’s weekly show Rule Breaker Investing at the link below, or wherever you listen to podcasts: https://www.fool.com/podcasts/rule-breaker-investing/ Companies discussed: NVDA, SPOT, AMC, META, RKLB Host: Ricky Mulvey Guest: David Gardner Producer: Mary Long Engineer: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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There's a tendency, of course, with our New Year's resolutions to get excited and to go all in, see where the market is. Think about some of the exciting industries of today and think, oh, yeah, I should load up and put it all in this one thing. And I hope anybody listening to us will think more about their first 20 investments and taking, let's say, $2,000 and investing it $100 each in 20 different stocks and start there and build from there. I'm Mary Long, and that's David Gardner, co-founder and chief rulebreaker here at the Motley Fool. He's also the host of our sibling podcast, Rule Breaker Investing. My colleague, Ricky Moldy, caught up with David for a wide-ranging conversation about rule breaker investing and how its principles apply not just to stock picking, but to life. They also discuss why individual investors don't have to think in one-year increments,

finding companies that add real value to the world, and how to use the market as a teacher. So, David, I'd like to start off the show with a little bit of storytelling as we welcome in some newer investors and people. who have hopefully been listening to this show for months and even years. I've been working at the full for a few years now. And often when I meet people who learn that I work at the Motley Fool, they'll tell me some version of this story. You know, when I just started learning about investing, I read your articles.

And I've heard that from, I've heard that from journalists. I've heard that actually from a CEO we had on the show. So people from all walks of life coming to the Motley Fool to learn about investing. And, you know, I'm hopeful that we'll have some of those stories. starting as we start 2025. But as you think about your experience co-founding this company and being here through the years, do you have a favorite story in particular that starts with the line? When I wanted to learn about investing, I came across the Motley Fool. Well, I'm happy to say, Ricky, 31 years in, that we have a lot of those. And I often think of them as campfire stories and we're all around a

great big campfire. And my hope for our company is that we keep reaching as many people as possible and grow the number of people at the campfire. But I will say at the end of last year on my podcast, it was my December 2024 mailbag. I closed with a note from somebody who I'll summarize it. I hope anybody who's inspired will listen to the final mailbag item because Dave Smallcoe's story is phenomenal. But to summarize it, Dave Smallcoe had never written in before. He had subscribed to the Motley Fool when it was a print newsletter in 1993. A few years before that, his dad had died young and had left $250,000 for his mother to support her in CDs, that at that time we're paying 8% interest. And his dad's instructions, his dying father's instructions to Dave,

his son, were just roll it over and keep it going and support her. And Dave, at the age of 28, was savvy enough that he had a CPA, so he was an accountant, but he had very little experience with the stock market. So he found himself spending time late night in libraries locally. reading Morning Star. And then he came across this thing called The Motley Fool. And at the age of 28, he made a decision against his dad's wishes that I know makes his dad so, so proud. Dave tells the story of taking that $250,000, realizing it's not going to pay 8% interest forever. And if we roll this over, my mom won't have anything in 10 years. So Dave allocates it 50 to this, 50 to that. It's 250,000. He puts 80 in individual stocks.

And he knows enough to pick some good stocks, but it was just a third of the portfolio. One of those stocks was Microsoft. He allocated $15,000 to Microsoft. That was a 6% stake at the time. And he tells the story on the mailbag on Rule Breaker investing a couple weeks ago of what happened. And in so many words, what happened was that he held. He held through the Great Recession, through the dot bomb. era 2000, Great Recession, 2008, through the COVID bump up and down. And Microsoft, on its own,

is a 500 bagger. And he was constantly told by people, especially financial professionals, to lock in those profits, to sell. And he said he always felt comfortable because it was diversified. It was a large, it was a huge stake in Microsoft. But that ended up putting three grandchildren, two great-grandchildren through school, his mom fully supported able to travel. It is just a beautiful story of somebody who kind of, like a rule breaker, goes against the conventional wisdom. He was diversified, right? Microsoft was just a 6% stake back in the day. But if you hold a great company for a generation, this is the kind of thing that happens. And Ricky, this is one of the messages that I hope my own rule breaker style will remind us of. I don't want to make it exclusive

to me at all, I think the Motley Fool has coached so many people around the campfire to hold. Well, I can give you plenty of reasons. Also, it would have been very smart to sell Microsoft throughout those years with Steve Ballmer's leadership. You have a new CEO coming in, Satya Nadella. Why don't we lock in a few, some of those gains for just a little bit, David, as we find out what this new leader is going to do. I know there are some fools who have been listening for a while, but I also want to recognize, hopefully, some folks listening that maybe just started a job and getting some disposable income that they're looking to invest in the stock market. Maybe they're seeing their friends right now making extraordinary gains on social media as we're

back into one of those cycles. But I think a lot of the general advice is stayed the same. What would you say to that person who is just now getting excited about investing in the stock market with maybe 100 or an extra 200 bucks a month? Well, first of all, congratulations. I hope that $100 or $200 is true savings. And that's That's, I think, where we always need to start, Ricky, and I know we've done this for a long time at the Motley Fool, but a lot of people are new to this. I think you have to save more than you spend. That's the hardest thing to do.

Truly investing is easier than that. And so congratulations to that person who is saving more than their spending. And I would say, keep doing that every two weeks. $100 is great. $200 is great. When we started the Motley Fool 30 years ago, you'd have to pay commissions that would eat up a lot of that money if you tried to invest regularly. But these days commissions, many brokerages charge nothing for commissions.

So there's no friction cost for your $100 to $200. I would say every two weeks, put that money into the market, stay 100% invested your whole lifelong. And make sure you love and believe in the investments that you're making. Funds for stocks. Hopefully for me, stocks. Dave Smallcoe, the story I just told, Microsoft was just one. of his holdings, but if you find a great company, one or more great companies, and hold on to them,

as you were pointing out, Ricky, there are all kinds of reasons to sell in the near term. But if you truly are saving more than your spending, showing patience and dollar cost averaging on a regular basis, whether it's weekly, quarterly, annually into the market and invest your whole lifelong, I think that you will do really, really well. So I think there's a tendency, of course, with our New Year's resolutions to get excited and to go all in, see where the market is, think about some of the exciting industry, of today and think, oh, yeah, I should load up and put it all in this one thing. And I hope anybody listening to us will think more about their first 20 investments and taking, let's say,

$2,000 and investing it $100 each in 20 different stocks and start there and build from there. I appreciate you saying not to go all in. Even if you are thinking that you have the next Microsoft on your hands, it's diversification in time or the common themes of what you're saying and very important for anyone newer listening and not so newer listening as well. We focused on some fundamentals. We had some storytelling. But there is a favorite foolish tradition, which is sort of ragging on market forecasts. And I know this is one of your favorite topics. I got one from Goldman Sachs, a big headline. The S&P 500 is expected to return 10% in 2025. There's some very smart bankers that will tell you exactly what they think the stock market will do this year.

David, you've been doing this a long time. What do you expect the market to do in 2025? I think the market's going up this year, Ricky, and that's because I think the market going up every year. And my record is a market timer predicting one year ahead each year somewhere around this time is enviable because I think most people are kind of a coin flip. And I get it right two thirds of the time. And that's because two thirds of the time the market rises. And I think it's always worth expecting it to rise, but recognizing it may not. In fact, one year in three, the market loses value. Earlier, you and I talked about making a whole life commitment to investing. So any given year doesn't matter that much to me. The Goldman's

X example you cited, they basically predicted what would be a traditional market year, about a 10% gain. Now, coming after two very good years in which the S&P 500 rose more than 20% back-to-back years, that's a little contrary. That's probably a little bit more bullish than a lot of forecasts. But I think the market's going up this year. I don't put a percentage on it because I don't really care that much. I don't like it when the market goes down. Who does? But I feel very confident that the real conversation is, of course, about the long term and be invested your whole life so that one year doesn't really matter much. But I think the market's going up this year. Good. I hope so, too. I understand why the large banks like offering the, I'll call it the false

certainty of very specific market predictions. It makes you feel more comfortable that the market is more certain than it actually is over the short term. Over the long term, it's been the greatest, the greatest wealth generation machine ever for people that have stayed and invested for for decades. We see the large banks doing this offering one-year market forecasts. But when you think about the foolish style of investing, why don't fools think in terms of those one-year increments? Well, it's because we don't have to. I mean, the beauty of being an individual investor, especially if you're self-directed, if you're rolling up your sleeves and doing at least some of it yourself, is that you're in command. When you give your money away to somebody else to

manage, they're in command. And of course, a lot of people make good decisions and they don't want to spend that much time. So they put it toward index funds, which the Motley Fool is always favored. And index funds have very low costs usually and typically mimic the market's returns. So that's a perfectly good approach. But even then, those funds rebalance on a regular basis. So that means they can't allow any stock to become too big or too successful. If Nvidia starts becoming a Titan, they have to start selling Nvidia and put it into things that are down in order to maintain the charter of the fund, which is to remain highly diversified. And so they're having to play a quarterly or one year kind of a game.

I think a great advantage to those who want to be self-directed. I think a lot of them are listening to us right now are that you can actually make these decisions yourself. You can decide whether you want to cash in and increase your tax bill this year or not. When you're investing in managed mutual funds, you're handed a tax bill. near the end of every year that you didn't have much control over, and the average managed mutual fund turns over 70 to 100% in a given year. So, seven out of 10 positions in actively managed mutual funds are no longer the same by December 31st from the first day of that year. There's

huge activity and turnover. And we benefit so much as fellow fools from finding good stuff and sticking with it. So I think we don't have to think in one-year increments. It's fun to make predictions. And of course, they're quotable for Goldman Sachs and their ilk this time of year. But I guess I would rhetorically ask, Ricky, where is the reporting at the end of that year on who said what and who got it right and who got it wrong and what anybody's baseball stats card looks like for their annual market predictions? We seem enamored of making them at the start of the year. Very few people are around at the end of the year holding anyone accountable with any kind of scorecard, which is why I spend so little time looking at that.

Well, you mentioned friction there. And the lack of friction for selling and buying the advantage of it being for the individual investor, where you don't have to pay a salesperson commissions for buying anything, but then you mentioned the amount of turnover going on in these actively managed mutual funds. It's never been easier to sell as well as the flip side of it being much easier to buy. So we kind of ragged on the one year. But then what is your expectation? How about a forecast for 2044 or 2045, if we're not thinking in one-year increments? What's your expectation for the stock market, then five, ten, even 20 years from now for someone who is investing regularly?

I'm pretty sure when I was asked this by somebody 20 years ago, I said about the same thing, and I hope it's about happened. 20 years is a good amount of time, first of all, Ricky, because it's a fourth or fifth of a life. It's long enough to really not be able to visualize what the world's going to look like, but it's still short enough to be meaningful and worth talking about in a way that is rational. So I would say rational expectations of a rational optimist over the next 20 years are that the stock market would return roughly 10% a year. Goldman Sachs' call for 2025.

Two years and three, I think I've already given you this ratio, but it's really helpful to remember at all times. two years in three, over those 20 years, the market will go up. One year in three, the market will go down. Something like, yeah, 13, 14 of those 20 years, the market will go up. This year might be one of them, or we might be one of the six or seven that goes down over the next 20 years. And one year in 10, I would say twice over the course of the next 20 years, there will be a horrifically bad bear market. And over the last 20 years, we can see it. We can see the great financial recession, 2008-9, and then 2022 was absolutely brutal. For me, as a Motley Fool

stock picker and rule breaker investor, I think I got cut in half in 2022. Others may have done better than I, but that's a really, really bad year. So I think twice over the next 20 years, there's going to be a very, very bad stock market for reasons we can't quite predict. And those usually last 18 months or so, the average bear market, six to 18 months. So just realize, and they always go down faster than they go up. That's one of my watch words. So I would say, in conclusion, it'll be a great 20 years. You will be well rewarded to invest and invest regularly. And I would say you're even more likely to outperform if you take my rule breaker approach to investing, which means you're holding for long periods of time the best companies of our time. And that's

my thought about the next 20 years. Well, and I've been trying to, almost root for bear markets is someone who is hopefully going to be investing for for decades to come and when you mentioned 2022 that's when did i ended up making some of my best decisions i won't say smartest because i got lucky with with some of them but there were a lot of big great strong companies that people were down on down and out on i'll think of one spotify for example where people thought they would never be able to make money because uh they're going to have they're going to pay too much to artists you have competition from apple there's no pricing power and people gave investors a million reasons to sell that company, but it's one, David, that I use every day

that I enjoy and has been so far for me. I'll call it a long-term winner. I want to focus on this idea, though, sort of what's changed and what's stayed the same, because in my anecdotal in smaller amount of time investing, I've just, I've noticed more pumping on X and especially Reddit is the market has gone up over the past two or so years. I found one subreddit. It's called the race to 10 million, where over 200,000 people seem to be trying to day trade their way into intergenerational wealth. And for you, as someone who has observed how people talk about stocks on the internet for a while, do you think, has the discourse changed or is it just the mediums? Well, I think that it's inevitable that you're always going to have some people who are hoping

to speculate their way toward great wealth as quickly as possible. I can't imagine that ever not being the case. Certainly, before the internet ever existed, there were penny stock pump and dump schemes. There were boiler room operations, often driven by the financial professionals that were trying to use penny stocks to jack up returns. It almost always ends badly. Those who were big fans, the apes and chimps around AMC, we've watched that stock. Anybody can take a look at the five-year graph of AMC stock to see what inevitably happens to these kinds of approaches to investing. It's not investing. It's trading. And especially, you're hoping to sell something that you just bought to somebody else who'll pay more. You hope a lot more as quickly as possible.

And while that will work for some people, it's going to be a tiny minority. And usually the people are orchestrating what's happening. Those are the people who are making money. Classically, penny stock pump and dump schemes were rigged by professionals selling naive people, the shares that they had pre-bought at penny stock prices elevated for them and leave other people holding the bag. So it's sad to watch that. It's going to happen in every generation. And yes, the internet does enable that in some cases, whether it was AOL chat rooms back in the day so-called or Reddit and aspects of Reddit today. I'm not going to call that out any much more than you and I just did. I think it's sad, but I often think it, for a lot of people, it's a step toward

understanding what actually works. So I think a lot of people left holding the bag on AMC stock, which is basically declined from 300 to 6 in the last three or four years. I think that that was a lot of younger people and people who have a lot more time to recover and maybe learn the lesson there. It is worth just calling out briefly that 2022, you mentioned Spotify, Ricky, and Spotify in 2022, just in one year alone, lost, as you mentioned, as you mentioned, a lot. It actually lost 66% of its value in 2022. NVIDIA got cut in half in 2022. So many great, strong companies had really, really bad years. But all the returns that we quote at The Motley Fool about how well NVIDIA is done for us, Netflix, Intuitive Surgical, Maracotta

Libre, all of those returns include every bad period. And I think people have to have to understand that. In the end, we're going to make money as investors by finding real things that add real value to the world. AMC has not added any meaningful, scaled real value to the world for quite a long time, and it's not going to anytime soon. So, Nvidia is for real, because Nvidia is at the vanguard of technology today, and all of those gains, to me, are real. I would encourage everybody to look at what they're investing and asking, do I see in the world that we're living in today? Do I see the effects of the products and services of this thing? Is it growing and is it helping the world? Is it exciting and dynamic? Or is it some bizarre side light being promoted by some

small group of people on some hidden place on the internet? And if you're in that place, I would get out of it as quickly as you can. I want to move this conversation a little bit to rational optimism. I've heard you recommend the book. And I've also had David Meyer recommended the book to me as well. So I've started I've started looking at it. Love it. We talked about 2022, and I think there's also a lot of investors who were investing through 2021. And they wish they just sold a little bit, David.

And honestly, that includes me too. I should have gotten out a little bit on these stocks before they had the crushing returns of 2022. And one of the main ideas in the rational optimist is that what makes people deeply human and different from other animals is our ability to combine ideas is a species, to hear an idea and then add our own thoughts to it and then share it with other people. This ends up building things like mobile phones where you have the phone meeting the internet, a technological peanut butter and jelly sandwich, if you will. There's an idea that I saw an X that I

wanted to run by you and see if you had any additions or thoughts on it. Great. As we combine and talk about it on this podcast, this was from a user called the Long Invest. and he wrote that just buy and hold. This advice is nonsense. The truth is, buy, hold, reassess, trim. Buy, hold, reassess, trim. Not trimming when a market correction is expected is ridiculous.

And what you've just described, David, would be described as ridiculous by this user on X. And I think a lot of people feel that way when, you know, oh, maybe I just should have sold a little bit of my high-growth tech stocks in 2021. When we think about Matt Ridley's idea, what would you add or combine to that idea after hearing it? Well, first of all, the idea of buying and holding, which are the first two words that you just gave from that person, are great. Both of those are what's really going to make you wealth over the course of your life as an investor, to buy and to hold. Then the concept of trimming, that's something that I'm certainly in favor of.

in some real-world situations. For example, if you hold a stock that goes up 100 times in value, you probably need to trim some of it over the course of time because it will take over your whole portfolio and possibly make it hard for you to sleep at night. So there are great reasons, especially when you hold great winners, to trim if you like. I do not believe trimming in reaction to perceived market conditions is going to work very often. I would encourage anybody who thinks that to make sure they're accountably scoring themselves. I would love to see the final results of somebody who is regularly saying, well, based on the market being a little overvalued, I'm going to sell this year. I actually think that you'll do better if you just keep holding than if you try to trim

selectively. Whenever you trim, which might feel good, the question then is, how much in taxes did you just have to pay capital gains taxes? Because you just trim down. some of your future money. And then second, where did you invest it? Some people trimmed away from NVIDIA and put it in something that didn't do nearly as well as NVIDIA. And so for me, as a rule breaker investor, I do think there are different types of stocks on the market. Again, I'm specifically focused on the rule breakers. These are companies I don't want to trim. But if I were in cyclicals, if I were in stocks that maybe are there mainly to generate income or that are reacting to perceive short-term market conditions. If that's my perspective, perhaps I would be more in favor of trimming,

but at least for the kinds of companies that I'm always talking about, Shopify, long-term winners like meta-platforms. These are companies, just do the math. Go ahead and trim, you know, one-tenth every three months and see what regularly doing that looks like. It looks like less money that if you just bought and held. Also, it's a lot easier to spend time buying and holding than to have to constantly actively trade in, trade out in my experience. But I want to make it really clear. There are many ways to approach the market. That person is probably acting well within how they think about things. Some people wait for dips. But Ricky, I've always said dips, wait for dips. I think that we should always be investing and adding. It's very hard to know where

the market's headed next. And I challenge people to be really good at that and think they should allocate accordingly. We mentioned meta platforms and that the market is a teacher earlier. And I'm glad you mentioned that because I, you know, I mentioned Spotify being a good idea. One of my worst ideas was buying meta and then saying, you know what, I'm going to trim a lot of this because the price has gone up a lot. Now I can get my cost basis out. David, I did what was the opposite of what rule breakers do. And then I missed out on some of the great gains that meta had in 2023 and 24. Well, you just did something very foolish, very capital, that a lot of Motley Fool people, including me, do, do. And that is, you said, I made a mistake. I'm human.

I think one of the things that defines Motley Fool podcasts, I've certainly tried to do this over the years as often as possible myself, is to talk about the mistakes that we've made. And in fact, one of the fun studies we once ran on Motley Fool Stock Advisor, I assume it's still true today. But Motley Fool Stock Advisor is a service. now in its, wow, 23rd, fourth year would have done better had we never sold any stock in Motley Full Stock Advisor, which we've done a number of times. It would actually have better returns today. This needs to be updated and confirmed, but I believe, last I looked at it, this was true. I think it's still true today. Motley Full Stock Advisor would have made more money for members had we never

once recommended to sell than when we did sell. And the reason really is because when you sell out a great winner, that is so costly to, versus selling out something that ends up dropping. Because the best you could ever do with the sell, for example, I once sold Strayer education. I was like, I don't think this one's going to do well anymore. We're out. And I was right. Three years later, it was down 75% from where we sold it. But I also said sell ARM holdings, which over the next six or seven years went up 700%. And there's not even any difference between the numbers plus 700% and minus 75%. The huge cost is the opportunity cost of selling winners. And so that's very important for me to communicate to our members and listeners. And I know you do a good job of it too.

We want people to understand the biggest mistake you can make is, of course, to sell a significant winner. That's much worse than having a bad stock pick, which, by the way, I've done all the time. I've talked about that a lot on the podcast. So thank you for being capital F foolish with me, Ricky, and with our audience. And speaking to the very human that lives. in all of us that makes mistakes in a regular basis, which is part of the reason, by the way, I try to take out the number of decisions I make. If you just buy, buy, and buy some more over the course of time, you don't end up ruining your sell decisions selling Apple in 1997 or Netflix in 2008. Or you get to sell on your own terms. I'll hear from fools that I sold this stock.

Why did you sell this particular stock? Oh, it's because my kid was going to college, right? I needed to fix a hot water heater going on at my home. Well, hopefully the hot water heater is for an emergency fund. But you get the idea. David, if you're going to play this game, you have to be a long-term optimist, which can be exceptionally difficult. Few things to be pessimistic about crushing national debt. We got drones over New Jersey. We don't know what they're doing. There's plenty of geopolitical risk going on with a war between Russia and Ukraine. You don't know what China's going to do with Taiwan. There are things to be scared of and pessimistic about. What are the reasons then?

Not just the past market returns, but why should someone listening to this be a long-term optimist? History is on your side. All right. Next question. Yeah. I mean, often when I was talking to people last year and they were upset about the election and on either party, just the whole feeling, Dave Barry, the humorous Miami-Herald columnist always does a year-end review. And hilariously, I recommend reading Dave Barry's column about 2024 and the craziness of the year we just lived through.

But as we got near the end of last year, and it's true right here at the start of this year, you can call it every bad thing, some of which are serious and some of which drones, anyway to me, not that serious. You can call it every bad thing. And yet I would ask you rhetorically, why is the stock market at all-time highs? And the reason is because the stock market is smarter than reacting to near-term if it bleeds, it leads headlines. The stock market is reflecting the growth of business, American business is the best business in the world. American business has better products and services today than at any point in history. And we often are in danger of taking things for granted, like how cheap it is to tap in over FaceTime with a relative halfway around the world for free

or to eat food that is far healthier or drive cars that are far less dangerous in every way to the environment and to humans than they were 25 years before. These things are constantly improving around us. AI is here to make things even better than that. I think it's very obvious if anybody takes a moment to look at the graph of the S&P 500 or Dow Jones, if you like, or the NASDAQ over any meaningful period, called the last 10 years, called the last 25 or 50, it goes lower left to upper right. And each of the really hard things that we lived through, which were really hard, 2008-9

was really hard. of those things look at backwards through a meaningful amount of time is a small blip on the graph. At the time you're living it, it doesn't feel good. But there are very rational, repeatable reasons why things go lower left to upper right over the last 50 years and will over the next 50 years. And that's really what has to be spoken to. I don't feel like I have to prove out why that is or that that is. Those are the facts. I think I would need to hear from somebody to explain to me why that won't continue to recur when I'm very confident that it will. And I think Ricky, a lot of The Motley Fool, has always started with people who are optimists.

Our company has been built by optimists and most of the people who are staying with us 20 years later with their memberships and really grateful. Stories like the one we talked about at the top of our interview, those are people who are optimistic. They recognize the goodness that's in the world. And I think that's so important to call out at all times, maybe especially this year. not sure. But the American economy, by the way, is such a wonderful. Warren Buffett, never bet against America. He's right. So, David, one industry that I'm optimistic about in my lifetime, and this is from looking at companies and talking to leaders of these companies, talk, and just reading the news, and to me, that's the future of space. And what's possible is low Earth orbit develops, where

companies are sending satellites into low Earth orbits, hopefully putting research projects up there. One example I heard from the Sierra Space CEO Tom Weiss, which is a company working, it's a private company, but they're working on building space planes that go to and from low Earth orbit, hopefully building super refined manufacturing for glass and microchips. One example the CEO told me about, David, is that even 3D printing organs where the problem in Earth is gravity, where these cell structures collapse in on themselves. But you could imagine, hopefully, a factory in low Earth orbit where they're able to do that. and build these cellular structures on top of each other without the pressure of gravity

and hopefully saving lives. This is also one that is it's nascent. These companies are not particularly old. Profits are extraordinarily far out. Hard to think of these companies in terms of particular operating metrics. Someone who's trying rule breaker style investing, how should I be thinking about the future of space and investing in these types of companies? Well, first of all, I think you should be paying attention, and clearly you are, Ricky. I love your description there. And there are enough interesting things happening. I read 1440 Daily, which is sort of my every morning check-in with the news. It's neutral, and it tends to focus on a lot of the innovation that's happening in our world. So I don't spend a lot of time worrying about all the

bad stuff or obsessing about that. I spend no time watching cable news. But 1440 Daily is a wonderful way to start my day. And I'm constantly encountering news stories. new tech developments like the one you just described. And I think that is just phenomenal on its own. Pinch yourself that you get to live over the next decade and through so many of these kinds of innovations. And then in terms of low Earth orbit space or the space industry overall, I'm very excited about it. I love the shift that we've had basically from government-funded, sort of government-monopolized approach to space to the private sector. It's worth always pointing out to people that the private sector dwarfs the public sector in the United States of America and many of the best countries

in the world today. And so opening up the private sector where most of us in the U.S. work every day. We work in the private sector, providing a product or service to people who are willing to pay. We hope above our costs for our product or service. That gives us profit, allows us to pay dividends, grow stocks over time. We all win together, which is the way good economies work. So how could I not be excited about the prospects in space? With that, that said, it's still so early. So there's a little bit of me thinking back to 10 years ago when 3D printing was first hitting. I was excited about it, and 3D systems was a really great stock pick for me before it became a really bad stock pick by me over the course of time.

Today, 3D printing, I mean, we've already mentioned in this conversation, but it's popping up in new and interesting ways 10 years later, and it's still early days for 3D printing. So I think whether it's the internet 30 years ago, AI, today, space today, so many things, it's worth paying attention, but maybe not getting too excited or speculating. People who put a lot of money in Virgin Galactic, ticker symbol SPCE because of the opportunity for tourists going into space have lost a lot of money over the last three years. I'm just checking the stock. It's lost about 500 times of its value.

That's about 99% of its value. from its highs. It's a penny stock today. But, you know, Rocket Lab, other, often I'm looking at the market caps of companies, Ricky, to see sort of, does this company, has it reached a really meaningful state of size and dependability? And Rocket Lab I was looking at recently, it's $16 billion market cap. So that's a small to emerging mid-sized market cap company. These companies often at the bleeding stage are not going to be making money for a while. So you have to look and see the burn rate. How much longer can they lose that much money without going back to the market and weakening their balance sheets? So I would say in a lot of ways, always have your eye on the

future. That's actually my license plate on my car here in Washington, D.C. It's future. If anybody's in the greater D.C. area ever sees a Tesla driving around with the license plate future. That's me. So I try to stay in the future and live backward to today and think about what are the things that really matter? And let's get our money there, position in the rule breakers of their time. To conclude my possibly long, shaggy dog answer, I think it's really helpful to make sure we're invested in things that are real and reaching scale. So Amazon was losing money for a long time. We were invested all the way through, and I'm so glad we were. They had real customers buying real products, starting with just books and CDs back in the day,

but it was all real and it was scaling and growing. Sometimes the exciting tech developments, where you hear about this company that's doing this crazy thing are not as real as that. So I really prefer to stay focused on the top dogs and first movers in the important emerging industries. And what you've just described is one reason I'm struggling with Rocket Lab is a shareholder. It's done fabulously well. There are signs of adoption. It's putting rockets into space.

It's not a top dog, but it's number two after SpaceX. It's hoping to get a rocket in the air called the Neutron Rocket, which dramatically increases the amount of weight that it can take to low Earth orbit from a few hundred pounds to the weight of essentially two to three adult elephants. But it is something where, as you can tell, I'm excited by the technology, but I can't give you, I don't know all of the adoption use cases. And there's a lot of, there's an end to the story where that rocket doesn't quite work out. It's not the top dog. And investors retract and decide that, you know what, this space is not as exciting as we thought it once was. Well, it's a volatile.

company, Rick, you just looking at the last few years. I mean, this is a stock that if you'd bought four years ago today, you would have watched it get cut in half three and a half years later. So you'd be sitting there going, wow, I don't like this stock very much. But of course, it's now gone up about four times in value or so in just the last six months, something like that. So, I mean, this is kind of what it looks like when you find early emergent companies. I really don't know whether it will work out or not for Rocket Lab, but I think it's a fun one to have in one's portfolio. And I've always said, make sure you can sleep at night with the allocation you have in each of your stocks. I've said it's really one of my portfolio principles for rule breakers

to establish your sleep number. What is the percentage you would allow your largest holding to become of the overall 100% pie of your portfolio? I would say that's your sleep number. And so if anybody, and everybody's different. Some people are comfortable with 20% of their portfolio in one stock. Some people don't. don't want anything more than 5% of their portfolio in any one stock. So it always starts with knowing yourself. But given that, I think there's room in anybody's portfolio for this kind of company, as long as it's not causing you to lose sleep at night or the tail that wags your whole dog. Unless you maybe work at Rocket Lab, you already know of the next thing and you're like,

we're going to crush SpaceX. I don't know. That's not me. But I think it's great to be investing in companies that look like your best vision for our future. And that feels like a cool one to me. Let's move on to a technology that is more developed than low Earth orbit, and that's artificial intelligence. This is also one that's easy to be pessimistic about. I don't have to look far on the internet to find long-term pessimists about artificial intelligence, whether it being the percentage of doom, people thinking that it will cause civilization collapse because of super-intelligent robots coming to take us all. I know it's something James Cameron has been worried about for a number of decades since creating the Terminator movie. But when you're looking, you're looking at

at artificial intelligence through the lens of long-term optimism, through the lens of rational optimism. Why is it something that you're hopeful about? Well, because it's going to make us smarter and it's going to improve so many things around us. Tied very closely to AI is, of course, robotics. And once you start putting AI into robots, you start seeing a much more automated world where a lot of the jobs that are lower-quality jobs today, that ideally humans could spend their minds and their potential on higher callings, I think a lot of those jobs are going to be taken over. The amount of automation that Amazon.com uses today is remarkable and has been for quite a while, but you ain't seen nothing yet. So I'm very confident that AI is obviously for real.

One of my favorite lines from Stuart Brand, the longtime tech visionary, Stuart Brand said, When a new technology shows up, an important one, a big one, you're either part of the steamroller or part of the road. And so I think it's very much worth being part of the steamroller with AI. And I appreciate caution and cautionary thinking there. And so I think there has to be always a balance. But let's not make the mistake of doubting the Internet, doubting e-commerce, which is what we faced as early stock pickers online with Fool.com.

A lot of people didn't even believe in e-commerce. I remember being on CNN and championing the idea that people would give their credit cards over the Internet. And that was, at the time, that was questionable. That seemed a little crazy because, you know, who's, or will that person on eBay actually send you the thing that you just bought from them online, whatever online means? These things we take for granted today, they've been such an enabler for our economy worldwide. That'll be the case for AI as well. And yes, AI will be used for ill in the same way that the internet has been used for ill. It's a powerful tool, but we're going to be part of the steamroller at the Motley Fool on this one.

And as we start to wrap up here, your show, Rule Breaker Investing is not just an investing show. You also talk about life. You talk about business. You talk about games, a number of things. And we've talked about rational optimism in terms of space, in terms of artificial intelligence, the future of the American economy. But to take a step back, more personally, how have you applied rationality? rational optimism to your business at the Motley Fool, to your life, to your career. Well, I think there are so many different examples, but one that comes to mind quickly is just that the importance of culture and corporate culture, both for us at the Motley Fool, and I would say for everyone listening to me who is in a workplace today, whether it's a

remote one or a local one, culture. I did a great interview years ago with Danny Meyer, who is the longtime successful New York restaurateur, Shake Shack, Union Square Hospitality Group, just a wonderful man and a wonderful entrepreneur. And he talked about scaling from those early first restaurant that he had. And what he realized, since he couldn't be at his second restaurant, like he had an incredible vision for how to run a restaurant. But as soon as you start expanding, you can't be all places. And what he did is he hired for culture.

He hired for people who may not have even been the top performers at his company, but he and rewarded the people who carried an understanding of hospitality and the ethos that meant so much to that business, the business he ran. So every business is different, but thinking about prioritizing the culture carriers, championing those who live and breathe the mission of the organization multiplies your impact, certainly did for Danny Meyer, far beyond that single restaurant or that single website or first application. So, that would be an example for me of a timeless truth that is not an investing lesson per se, and it's not just a life lesson per se. It's in that middle space, Ricky, which is sort of

business and professional, like what wins in the marketplace? Of course, we want to be invested in the companies that do that, and we want to start those companies or work at them our whole lives long, but I love observing, like, what are the businesses that are truly great? I'll give another quick example, Old Dominion Freight Line. This is a trucking company. Most people may not have heard of it, although they are a major league baseball sponsor these days and they're kind of a bigger deal. But this is a family-run business and it's third generation. And in an industry that's largely unionized, Old Dominion has remained largely free of that because they treat their employees so well. They're constantly coaching up people

who want to drive a truck. Or if you're already driving a truck and you want to go into IT at the company, they're coaching you up over the course of time. That is so endemic to their culture. and that's such a strength that why Old Dominion, I'm happy to say, one of my stock picks from Motley Fool Stock Advisor has been and will continue to be such a long-term winner. So I think looking past the charts, the ticker symbols, and looking at the guts of something and say, what's the culture there? And is that a culture that I believe will win? Is that something I want to be associated with, either work in it or invest in it? I think those are great rational and often optimistic conclusions that we can learn and act on. I think that's a great place to end it.

David Gardner, I'm so grateful for the time that you've spent with us on Motley Fool Money. You have a show. We should plug. It's called Rule Breaker Investing, our sister show in the Motley Fool podcast portfolio. Thank you for your time for your insight and thank you for being here. Thank you, Ricky, and thank you for you and all the work that Mary and the team does to make this our best podcast. So it's a delight to be on it. As always, people on the program may have interests 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. All personal finance content follows Motley Fool editorial standards

and are not approved by advertisers. The Motley Fool only picks products that it would personally recommend two friends like you. I'm Mary Long. Thanks for listening, Fools. We'll see you on Monday.