Motley Fool Money - How Adam Smith Can Change Your Life

Episode Date: January 23, 2015

Netflix surprises.  McDonald's stumbles.  Starbucks serves up big earnings.  And the New Hampshire lottery serves up the sweet smell of bacon.  Our analysts discuss those stories and share some stocks on their radar.  And economist Russ Roberts shares some insights from his book, How Adam Smith Can Change Your Life:  An Unexpected Guide to Human Nature and Happiness.     Learn more about your ad choices. Visit megaphone.fm/adchoices

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which makes it so much easier to stay on track. And you can get unlimited expert help at no extra cost, even on nights and weekends during tax season. Visit turbotax.com to get matched with an expert today, only available with TurboTax full service experts. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Full Money Radio show. I'm Matt Greer filling in for Chris Hill this week,

and I'm joined in studio by Matt Argersinger and Jason Moser from Motleyful Million Dollar Portfolio and Jeff Fisher from Motley Full Pro in Options. Guys, thanks, Mack. Guys, Chris is sick, so we want to wish him a speedy recovery. And the latest email I have from him says that his kids think he sounds like a Lego Batman. Oh. Well, that's actually pretty cool then, right? That's actually how I think he always sounds.

I think he's got a great voice and I think it got even greater. Lego Batman. It's better, you know, remember the Christian Bale when he was playing Batman in his voice? Yes. We got to go get them. You know, it was pretty dead. I mean, like the Batman voice in the Lego movie was just epic. I mean, I think any time you're associated with Batman, you get to feel pretty good about that.

Yeah. So there's an upside there. But anyway, get well, Chris. On today's show, we got lots to talk about. We've got earnings from Starbucks, McDonald's, Netflix. We have economist Russ Roberts talking about money and happiness and Adam Smith. You remember Adam Smith? Yeah, 1776, baby.

There you go. And, of course, we have stocks on our radar. But let's get right to the earnings news. The tale of two companies here, Starbucks reporting just huge earnings. Stock was up sharply. McDonald's, eh, more of the same, declining same story. sales, stock not doing too well. So, Jason, let's start with Starbucks. Yeah, I mean, let's start with Starbucks. I mean, I think anybody who thinks that maybe Starbucks is hitting sort

of its peak and the growth is slowing down, I think they better think again. I mean, this is a company that has continued to just defy expectations. It basically is taking those jokes of a Starbucks inside of a Starbucks bathroom and more or less just completely put them to rest. I mean, And it really is amazing to think about what they've done so well. And, I mean, with sales and earnings up considerably, the drivers were more store traffic and higher average tickets. The reason why they're driving more store traffic and higher tickets is because they did a great job promoting the holiday offerings.

They've added some new offerings to the food side of the business. And food actually performed very well this quarter with breakfast sandwiches, growing 30% new lunchtime offerings growing 15%. So, you know, we've always harped on the fact that Starbucks has done so well without ever getting the food part really right. It seems like maybe they got something right this quarter. And then really, it's just amazing to me to see the power of the Starbucks loyalty card in a particular, the mobile app that they've developed. I mean, hats off to Howard Shultz for having the wherewithal to invest in this in such an early stage of the business because it's really paid off in a big way. I mean, Starbucks says

laid out the blueprint for a retail mobile presence. And I think that, you know, there will be businesses out there for years to come just trying to copy what they've done. One in seven Americans received a Starbucks gift card in the holiday quarter? And I didn't even get one, man, which was kind of surprised. I thought I might get one. I don't think I got one. Did you? I did not, but that is an amazing stat. I bought my brother one. So there you go. There's one. My brother was one. Seven million average weekly transactions done via mobile app this quarter in the U.S.

7 million average ones. And that's on the Starbucks app. Basically, you don't need Apple pay. Yeah, they basically said we don't need it. And they also named a new president in COO? Yeah, I think that's actually really interesting. It's Kevin Johnson, I believe, is his name. He has a tech background, which I think is really, really good.

You know, a little interesting tid that I pulled from the conference call yesterday. It was the word coffee was used 31 times. The word mobile was used 34 times. So they obviously know where the priorities are. But I think this is really interesting as to what this maybe tells us about the future, because we know that C.O. Troy Allstead is taking a sabbatical. It doesn't sound like, though, he's leaving for good. I can't help but think that maybe what this does is set the stage in the coming years.

At some point, we'll see Howard Schultz. He's 61. I think we'll see him step down maybe at some point. And Alstead come back to fill in that role as CEO. And they'll have a well-established C-O there. there and Kevin Johnson, who's been there for a few years, in order to be able to help the company continue its path forward. And, Jeff, let's switch gears to McDonald's, a very different story at McDonald's. Same store sales continuing to decline. Around the world, too. And this has been a long ongoing problem at McDonald's, of course, as competition grows in the U.S.,

but also around the world from the likes of Chipotle, Panera, even things like Five Guys are mentioned now. But so many small franchises are growing. and taking market share bit by bit with better quality food at competitive prices. So why go back to McDonald's for the same old thing? So they know that. So they continue to try to retool their menu. They're dropping more items off the menu to speed throughput with customers and lower costs.

And they're trying to appeal to the younger consumer out there. But it's a rough uphill battle. So the stock has gone nowhere for three years since late 2011. Exclude dividends the stock is down the last three years. years plus. And they're forecasting a week, first half of this year as well. Problems internationally as well as U.S. They have a tough road ahead of them. But how about the new ad campaign? Am I the only one who loves the new McDonald's ad campaign?

I think so. Can you do the jingle? What is it? I can do the jingle, but I think the commercials are very inspirational. Why, I get the confused? Have you guys seen the new droid, Android commercials? No. They're very similar to that. So I always think I'm watching an Android. It's, you know, little animated figures jump around, but you're... I don't know. That's not good if you're McDonald's.

No. But you're right. I'm getting confused. Just on a side note, they do accept Apple Pay, and I love Apple Pay. I think it's a great format. But Starbucks, the reason Starbucks app is doing so well, it rewards you with the Starbucks stars, so you actually would rather use that when you're there than Apple Pay. It's interesting to watch this little e-wallet battle take place.

Okay, so exit question here. Starbucks market cap of around 66 billion McDonald's, around 88. billion, which company gets to 100 billion first? Great question. Oh, I would have to go with Starbucks. I mean, I think McDonald's is facing too many challenges. I mean, as far as growth goes, I mean, they're not going to be, they're not going to witness those days of growth from years ago.

I mean, they're in a position now where they have to play a lot more defense, and Starbucks is in a tremendous position where they're playing just total offense, and they're tackling it on all fronts. It's coffee, it's tea, it's food, it's mobile payments. I mean, I think they're setting themselves up for some real success here in the next decade. So moving on to other earnings news, Netflix reporting much higher than expected earnings. Stock was up sharply this week. And, Matt, there's an international story here.

Well, yeah, the earnings, we can go into the earnings. They were great. I mean, the 57 million subscriber number was huge. Adding over 4 million subscribers in the latest quarter, predicting the same number, roughly the same number in the current quarter. Those are big, big numbers. But, yeah, the story here is certainly, Reed Hastings coming out and saying, saying, you know, we're actually going to be done substantially with our international build-out in two years, which seems rather quick and remarkable. But, I mean, remember,

it's sort of just laying the groundwork. It's not like Netflix is going to be a huge established brand across the world. But the fact that he thinks they can be in over 200 countries, presumably by the end of 2016, early 2017, is remarkable. And I love the, in particular, his quote here, that he expects Netflix to be generating material global profits from 2017 onwards. I think that's compelling to it for a lot of investors, because there's a lot concern early on about Netflix, spending a lot of money for their expansion, buying a licensing a lot of content. There's just a lot of CAPEX that has to go into that. And the fact that he thinks they're going to be in a position to be materially globally profitable from

2017 onward. In a way, it's kind of interesting. It's almost like the anti-Amazon here, right? Everyone kind of gets on Amazon because they're relentless in their decision not to produce profits. And here's Reid Hastings. a tech CEO coming out and saying, no, guess what? We're building out right now. But in 2017, we're going to be generating some serious profits. And I think that the market like that. I think that's the reason the stock was so strong this past week. And Jason, let's talk some Amazon here because Amazon, big week, they announced plans to release 12 movies directly to the theaters.

Yeah. Beginning this year, they're going to release 12 movies. They also made an interesting acquisition. Yeah, so the movie side is neat, I think, because they're focusing more on the indie style movies, and so it's not these big Hollywood blockbusters that you see that, you know, are produced for $200,000 or whatever. These are going to be smaller 5 to 25 million endeavors. And, you know, I think it's interesting from a number of perspectives, but at the end of the day, everything they do at Amazon, essentially, aside from the Amazon Web Services business, really revolves around prime members.

I mean, that's the point of all of this, is really to create a value, proposition that is just too enticing to pass up and convince you that your prime membership is really just a cost of living and you get a lot of value out of it. Now, they've done a great job with doing that. I mean, it sounds like they had a wonderful holiday season and signing up 10 million or more prime memberships just in that quarter alone. But I think this is just another way for them to play into the fast-changing space as far as distribution of entertainment goes. And they need to figure out ways to get theaters on board with this. You remember, it wasn't all that long ago. Netflix is doing the same kind of thing with one movie, Cratching Tiger, Hidden Dragon. And I know that the theaters

were a little bit hesitant to give them that shorter window. But I think that your Netflix's and Amazon are going to continue pursuing this and convincing the theaters that really it is all about distribution and going to where your customers are and where they want to be. And as ticket sales are telling us, it's not always the movie theater these days. So I think that we'll continue to see this happening as time goes on. And in regard to the chip acquisition, that's a chip maker out in Israel that the rumors of the deal around $350, $375 million, this plays right in the Amazon Web Services side of the business. This is something to help their cost structure there as they continue to grow that business out. And it's becoming very material. It's estimated it's going to

bring in around $6 billion this year in sales. And that will continue to grow as time goes on, as cloud computing continues to grow in popularity. And Amazon is getting really the lion's share of that market today anyway. And Jeff, let's talk some American Express. Fourth quarter profits up 15 percent. That was better than expected. Yeah, the stock has been kind of a laggard over the last year losing to the market. It has, Mac. It had an outstanding 2013 where it gained about 50 percent, and then all of last year it stayed flat. And now it was down a little bit on this week's earnings. The main concern is more competition on the high end of the credit card space, so the likes of Visa and MasterCard offering more kind of Amex high-end loyalty cards. And that

leads to higher expenses or rebates to your customers. But overall, Amex is doing really well. Their charge-off rate is very low, record low. They grew, as you said, bottom line around 15% this past year. And I think they're still set up well to do strongly over the long term. And finally, Matt, let's talk some eBay. Shares up this week in the wake of the company's earnings. What's the headline here? Well, to me, the headline is the marketplace business really struggled in the fourth quarter, which was a surprise. I mean, there's a lot of moving parts of the story right now.

You've got Carl Icon who's joining the board. You have a potential spinoff of their enterprise unit. I think those are the reasons the stock was probably up this past week. But to me, I mean, if I look at the marketplace business, which was up 1% year over year, you've got to remember, eBay's a giant in e-commerce. E-commerce. sales overall, we're up about 16% by most estimates for the holiday period. And here's eBay's marketplace business up just 1%. I think that's really disappointing. I think the company can't wait to spin off its PayPal unit and maybe see if it can turn some of those, some of that new fresh capital into maybe some M&A. But overall, not great results by my estimate.

Coming up, Google, Delta, and the sweet smell of bacon. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. Mac Greer, subbing in for a sick Chris Hill this week. and I am joined by Matt Argusinger and Jason Moser from Motleyful Million Dollar Portfolio and Jeff Fisher from Motley Full Pro and Options. Guys, the news for Leapfrog just woof, keeps getting worse. Sherrisfell, after the company said that it expects to report a loss for the holiday quarter. Matt, is it that bad? Oh, well, here's how bad it is.

They are expected to, when they actually release their results, the net sales are going to be about 145 million. That compares to their prior guidance of about 220 million to 240 million. And I'd say that's the highlight of that release, really. Yeah. It was dreadful. And Jason, of course, knows we issued, we decided to sell Leap Frog out of a million dollar portfolio this week. We issued a sell recommendation. And the day we did that, Leaprogg came in after the market and gave these really disappointing numbers and the stock, I think, fell 30 percent or more. So, you know, this is just one of the examples of a really just not well-run company, certainly

a company we don't think should be in the million-dollar portfolio. Their execution is horrible. There's no question there because they've been in this perpetual turnaround for a while. And it's not that they have, they don't make bad products. They make actually decent products. And they're making hardware and software. Well, yeah, they're making hardware and software. They're trying to make this pivot to content and more software, which is going to require,

you know, a lot of R&D spend to pull that off. But they're facing this ever-shinking market opportunity, really, as parents, You know, Leapfrog makes products are really great for like me, maybe two, three, four-year-old, five-year-old kids. But from then on, parents are just making that leap to just your tablets. And so you have your Amazon's and apples of the world that are going in there with these, you know, great pieces of hardware. But even more so, excellent app ecosystems. And I mean, just speaking as one who got my daughters those Kindle fires years ago, there are just wonderful educational apps on those Kindles. And then they can use them to read, obviously, from the Amazon Library.

So they just face a really, really competitive market space. And unfortunately, management just hasn't been able to execute that turnaround the way they wanted to. And Jason, let's talk about a company that's had a little more success than LeapFrog. Google. Yeah, a little bit more. Google announcing this week that it's getting into the wireless business is going head to head with the likes of what Verizon and AT&T. Yeah, yeah. I mean, this is just a little bet on Google's part.

It's called a mobile virtual network operator agreement. They're able to take some surplus. that these wireless providers have and they can brand it and sell it. And it's going to, you know, Google is going to have to take care of the customer service on the billing side of this. But I think that what they're doing is trying to figure out more ways to get more internet into more people's hands. And, you know, with the global domination, really, the Android platform, it's not that dominant here domestically. I mean, Apple, Apple is giving them a good one for their money. And so I think that this is a way for Google to try to get more Android devices out there. And, you know,

And it's not something that is going to make or break the company, but I think it's something that will give them a lot of insight into strategies they may want to pursue in the future. Jeff, from the sexy world of Google to the less than sexy world of airlines. Now, I think a lot of us think airline stocks and we think stay away. But airline stocks have had a nice run lately, and Delta having a nice run this week. That's true, Mac. And the industry has really changed before our eyes in recent years. We're down to four major carriers in the U.S. that command about 90% of all domestic flight traffic in this country now. It's Southwest, American, Delta, and United because we've seen so many mergers the past handful of years.

Those four are now by far the leaders. And they're starting to price tickets rationally. They're keeping supply, restrained so that they have some pricing power. Same pricing power along with airlines sounds wrong. but so that they can maintain pricing at least where it's at. And now, of course, they're benefiting from much lower fuel costs. Fuel for airlines, the price has gone down by half since last summer. So all these airlines are showing profits and expect to have a strong 2015, even if traffic remains flat.

And finally, guys, our favorite story of the week, the New Hampshire State Lottery, is now offering a lottery ticket that, wait for it, smells like a. bacon. The new tickets are scratch and sniff and read, I heart bacon. Does it get any better than that? Okay, so the New Hampshire lottery comes to you and they say, we've had great success, but we've got to top it. Scratch and sniff.

What smell are you going with, Matt Argersinger? Top to top bacon, but you know when you're on a flight, speaking of airplanes, you're on a flight, the airline smell, you come off the flight and there's a cinnabon kind of down the corridor and it's just wafting with, that kind of, that kind of, beats bacon. Jason? Yeah, that's a good one. I mean, I'd be hard pressed to really beat the smell of bacon, but if you're going to make me do this, you know, I love the smell of home on Thanksgiving Day with the Thanksgiving dinner cooking in the house. You walk in there and smell that, like the turkey

and the stuffing and everything that's in there cooking. I mean, to me, that's just a great, that's a great smell. It gives you, you know, makes you feel good. That's great, Jeff. So the water rides at Disneyland and Disney World are reportedly one of the most popular smells in this country because they remind everyone, Pirates of the Caribbean, you know, they remind you of your childhood. Very interesting. There you go. Okay. Well, there you go.

I wonder if you can just like to throw a couple of little, you know, chlorox things around out of the world. It's a smell out there. Your kids just always reminisce. Okay, Matt, Jason, Jeff. We will continue the conversation later in the show. But coming up, economist Russ Roberts talks about his new book, how Adam Smith can change. Your Life, an unexpected guide to human nature and happiness. Stay right here.

This is Motley Full Money. Welcome back to Motley Full Money. Matt Greer subbing in for Chris Hill this week. Want to be happy? Our next guest says you need to think like the economist, Adam Smith. Russ Roberts is the host of the award-winning weekly podcast Econ Talk. And he's the author of How Adam Smith Can Change Your Life, an unexpected guide to human nature and happiness.

Motley Fool's CEO Tom Gardner recently caught up with Roberts and Roberts began by talking about where the idea for the book came from. It's actually my agent got me to write the book about it. I was going to write a book about Adam Smith so I wrote a proposal for that and he said oh this isn't a very good proposal. It's not going to be a very successful book.

He said but there's one line in here that's really grabbed me. Wow, what's that? He says, the theory of moral sentiments is the best self-help book you've never read. That's a book worth writing. So that's what I've tried to do. So can you give us just a flyby of who Adam Smith was, when he lived, how he lived, and then just draw the distinctions between the wealth of nations and the theory of moral sentiments?

So Smith lived in the 18th century, sort of the middle chunk, 1723 to 1780, roughly. He is considered the first economist, which isn't fair. There were a lot of people doing economics at the time, what we would call economics. And the reason I think we think of Smith as the first economist, because he wrote a book, an inquiry to the nature and causes of the wealth of nations, that was so extraordinary and so powerful and so insightful that people still read it today with profit. It's still worth reading. He has insights into life and into economics that are still worth reading. He's famous for a few things, some of which you've heard of. He was a big free trader.

He was a big arguer against mercantilism, the idea that we need a protectionism to be wealthy. He invented the idea of the invisible hand, although it's not really the way he wrote about it. The way we think about it now isn't quite the way he wrote about it. He believed in liberty, but he was not an anarchist. He thought there were a lot of productive and useful things the government could do. But he was a free marketer in general, and in many ways he made commerce respectable. So that's that book. But this other book, that's sort of a macrocosm book.

This other book is a microcosm book. His other book is about how do we treat the people who interact, we interact with day-to-day? How do we treat the people we're seeing face-to-face? How do we treat our colleagues at work? How do we treat our family? How do we treat our close friends? And that world's all about empathy, sympathy, or lack of it. There's nothing about sympathy in the wealth of nations,

and there's self-interest in the theory of moral sentiments, but it's mainly how do we overcome that? How is it that we sometimes do the right thing? How is it that we sometimes put ourselves second? Because everything inside us screams, me, me, me. And I think that's a very profound truth about human nature. And he takes that truth, and he spins it out in a thousand different ways, and he writes well.

So I encourage everybody to go read the book. You can find it at Econ Live, E-C-O-N-O-E-E-O-N-E-E. lib.org. There's no charge. You can search it there. You can find whatever you want. I read the entire book for no charge. But it might be slow going. So if you need some help, that's where I wrote my book. So I just want to toss out a couple concepts, Adam Smith concepts, from having read your book, since I have not read the theory of moral sentiments or the wealth of nations. The first is the iron law of you, which you were kind of talking about, but the iron law view. What is it? So this is not in Smith literally, but it's all through Smith, which is you think of yourself as more

important than other people. And you think about yourself a lot more than you think about other people. And so the example I think I give in the book, although I got a lot of other examples, some of them got taken out, is it, you know, let's say you apply for a job, you send somebody to email, and a week goes by, and two weeks go by, and you think, oh, they think I'm an idiot. They don't want to hire me. I have no chance. My email got thrown out. They're so uninterested in me. They didn't even respond to say, we're not interested. And I think we've all had that experience in life, where we just sort of, you're thinking about it when it's your email that you sent looking for the job, you're thinking about it about every four minutes.

I check my email. I wonder if they wrote back. Wonder if they wrote back. Every time it's like, they didn't write back. They don't love me. They don't love me. But you forget, they're busy. They're absorbed with their own nonsense. Their own whatever it is that's absorbing them every four minutes. And so as a result, it's very easy to forget that you're not the center of the universe for other people. You're only the center of the universe for yourself. It's very hard to remember how other people look at you. Who is the impartial spectator at Adam Smith? So Smith gives us a method

to help us remember that we're not so important. And he doesn't give us this method to be nice to us. He thinks it's how we actually sometimes make decisions. So he says, when we try to decide what to do and we want to put ourselves first, the thing that stops us is being aware that what if somebody we're watching, an impartial spectator, not my spouse, not my uncle, not my close friend, not my alter ego,

not my good twin, or my evil twin, but a stranger, a person who knew the facts of the matter and didn't have my self-interest in terms of judging whether I'm doing the right thing or not. So it's sort of like a little angel perched on your shoulder that you imagine is there thinking, hmm, I wonder if that's a good thing to do. So he says sometimes, so sometimes the impartial spectator will reign in your self-interest at the time. Other times, it'll be an after-the-fact educational lesson. You realize, I shouldn't have done that. What I suggest in the book is,

use an actual impartial spectator at times. When you have a moral dilemma, when you have a situation at work, you have a situation in your family and life where you're not sure what the right thing to do is, it's often a good idea to seek outside counsel. Somebody you trust who's not going to just be a yes person. Oh, yeah, you're doing the right thing,

but who's going to tell you, I don't know if that's, uh, Like say you want to deflate the footballs before the game, just hypothetical. And you say, well, you know, I don't think we're going to get caught. I know, but suppose someone we're watching, would it be a good idea? You know, that's an example to me where it's the wrong thing to do. I don't think it's why the Patriots won, but it's the wrong thing to do. Unless everybody does it already, they probably do.

Don't you think? Isn't it like common, maybe? Because I'm hoping maybe. So there's the interaction between the Iron Law View and the impartial spectator to counter that in Adam Smith's work. What about our desire to be not just loved, but to be lovely in Adam Smith's mind? What does that mean? So Smith is very adamant, again, surprisingly to some people who might not know his other work or who might have gotten a vision of Smith through third hand.

Smith's very against the accumulation of wealth for its own sake. So here's a guy who writes a book about how nations get wealthy and we all think that's a good thing and get out of poverty, but he says, for you personally, he said, the pursuit of wealth for its own sake, the pursuit of power, pursuit of fame, these are ambition generally. He said, these are bad things. They're poison. They're toxic. Try to avoid them. Because once you get on that treadmill, you can't get off. So that's what he says. Why do we want fame, power, money? He says, because then people pay attention to us, not for what it does. This is, again, sort of a very alien idea to a modern economist, I find very interesting. He says, money doesn't make you really have. Having stuff doesn't really

make you happy. The reason you like stuff is that people look up to you. They're impressed with you. They listen to what you have to say. When you walk into a room, they pay attention to you. That's why people pursue money, fame, and power. And he says, it's a bad way to get attention. So he says, man naturally desires not only to be loved, but to be lovely. Man naturally desires not only to be loved, but to be lovely. That's his one sentence description of what makes us tick. So what makes us tick isn't money and it's not power and it's not fame.

What makes us tick deep down, what drives us is the urge to be loved and by loved he didn't mean physical love or romantic love. He meant attention, honor, praise, respect. So he says we want those things desperately. That's what gives us true satisfaction. Not money, power, and fame. but respect, honor, and people paying attention to us.

That's what we care about deep down. But we don't just care about that. We also want to be lovely, meaning not just love, but lovely, meaning we want to earn those that respect, that honor and that praise, through our actions, honestly. We don't want to be loved for something we didn't do. Now, what Smith says is because we want to be loved, we have this temptation.

He says there's two ways to be loved. pursue fame, power, and money, or pursue virtue? He says, everybody is seduced by the glittering road, the fancy, impressive road of fame, power, and money. He said the quieter, better path is just to be a good person. And he said, you'll earn the respect to the people around you, and you'll earn it honestly. Now, you could earn love through being rich, famous,

powerful, but what Smith says is it's hard to keep your moral compass when you're in pursuit of those things. And I think that's really the challenge of modern life, especially we live in such an incredible world where it's not, there are many, many ways to make a lot of money. It's hard to keep money in perspective. It's hard to keep fame and power in perspective. What Smith says is, if you're going to pursue those, you better keep them in perspective because they will, they will pursue you if you're not careful. So now that we have some concepts on the table, I hope I've earned the right to start asking some very unfair questions.

Sure. So here's the first one. You referenced this in the book. So make an argument, if you're willing to play this game. Well, actually, a true argument, what you believe in, and whether or not you think Peter Buffett or Warren Buffett has led a happier life because of choices they've made and what they've pursued. Yeah, so I give the example in the book.

Peter Buffett wrote a memoir recently. Warren Buffett's son about his early life when he was in college. And his father came to him and he said, I'm going to give you your inheritance now. And you can take it and do whatever you want with it. And I think it was it 100,000. 90,000. 90,000. In Berkshire stock, yeah.

Yeah, so he gave him Berkshire, Hathaway stock, maybe it wasn't Hathaway. It gave some stock that was worth $90,000. And he said, you could hold it or you can let it grow and let it grow, or you could sell it and do something else. And he thought about it for a while. Peter Buffett wanted to be a musician. And he decided to sell the stock, convert it to cash, take the $90,000. And with his father's help, create a plan for how he could make that last for a while because a musician's career is a little bit uncertain. And he dropped out of school. He was at Stanford. He dropped out of school with his dad's help. So he did that for a while and he probably was about on the verge of running out of money

and maybe he would have gone back to school. I don't know if he writes about in the book, but some neighbor mentioned to him that there was this new thing started called MTV and they were looking for somebody to write some music for him and was he interested? And he ended up doing that and being successful. And he's been a very successful musician. he's won, I think, is it, I think he won an Emmy. You've probably read the book more recently than I have. But he wrote, he wrote, I think he wrote the score for Dances with Wolves. He's had a very successful career, and he's financially, you know, comfortable,

because he's made money as a musician. Of course, if he'd held the stock, oh, baby, he'd be worth... 100 million. 100 million. Oh, okay. That would have been a good return. So he had $90,000 worth of stock. He didn't know that it was going to be worth $100 million, right?

Couldn't know for sure. So there was uncertainty. But now I ask you the book, we can look back on it and say, if he'd known that, would he have made the same choice? So here's the choice. I'm going to give you a successful career doing something you love, which is really special. Most people don't get to do that.

But there are even fewer people who get to have, $100 million. So which would you choose? And now I want to counter that or add the other story of the father, which, I don't if you've read Snowball or Roger Lowenstein's book on Buffett, but essentially Buffett from a very early age was pursuing money. Yeah. It's pretty clear that he is pursuing the accumulation of wealth. He's very numerical.

He kind of delights in seeing how the numbers will play forward, compounded out in the creation of wealth. But he's also doing what he loves. I mean, he's truly pursued a craft that we, at the full, many of us, pursue and are trying to help the world invest better. But Adam Smith says if you pursue wealth for the sake of pursuing wealth, you will not end up happy for having made that decision. So in the book, I argue that Peter Buffett made the right choice.

that $100 million is a small price to pay. It's a small thing to sacrifice to spend a meaningful life, doing something you love, and giving pleasure, by the way, to the listeners to your music and all those things, right? So that's my point.

So I'm going to rephrase your question. Does that imply that Warren Buffett is a bad person, made the wrong choice, right? And that's a good question. I think, again, I think it's a question of perspective. Now, I don't really know what Warren Buffett's like. I don't think very many people do. He has a very, I'm sure, a carefully crafted public image to some extent, right?

What can we say about him? He stayed in Omaha, which is very interesting, right? He didn't, there were many people who moved to New York or Paris or London in that world and flaunt it. He doesn't seem to be a flaunter. Stayed the same home. Right? Raised his kids, seems like in a way that gave them some freedom and responsibility about their lives, like this story we just told. So he could be a very good man.

I don't think, and I think it's a very good thing as an economist, it's a very good thing to have resources flow to their highest valued use. Because to give the world more access to wealth doesn't just mean more toys. It means longer life, right? So I don't, right, lifespans have grown, I think very much in response to the fact that we have more resources, not just good luck or good technology. Those all flow from our underlying wealth. So I would never say anything critical about wealth. And Adam Smith, he walks a fine line. He says some critical things about wealth.

But again, it's mainly the pursuit of wealth. So I think it's, again, a question of perspective. The challenge is, how do you keep that perspective? So if you love numbers and you love spreadsheets and you love watching those numbers climb, you can tell yourself in the back of your mind, yeah, but I'm changing the world, which he has, right? I think he's brought a lot of pleasure to people through that pursuit of numbers, not just by making them wealthy, although that counts, but also the fact that the businesses that he's acquired and run better have made the world a better place.

So I don't, again, I don't think there's any inherently bad about keeping score with money. I think if you do that, though, you better be careful because you're likely to be consumed by. Coming up, we'll share us some stocks on our radar. Stay right here. This is Motley Full Money. As always, people on the program may have interest in the stocks they talk about, so don't buy ourselves stocks based solely on what you hear. Welcome back to Motley Full Money.

I'm Matt Greer, subbing in for Chris Hill this week, and I'm joined in studio by Matt Argersinger and Jason Moser from Motley Full Million Dollar Portfolio and Jeff Fisher from Motleyful Pro and Options. It's time for stocks on our radar. And guys, subbing in for Steve Broido this week is our very own Rick Ingall. Rick, are you ready? I'm no Steve Broido. He's ready.

He's ready. No one is. No one is. Matt, what do you have for us? Sure. Well, you know, a good buddy, mine, Aaron Bush, on my Odyssey One team in Supernova, just got back from CES. And the one thing he said is that drones were basically everywhere, just everywhere.

But the consumer market for drones is not that appealing. We own a stock called Aeroviron. which is the leader in industrial and getting in defense and getting into commercial drones. The ticker is AVAV. And I just think there's a lot of hype around drones, but when the rubber hits the road, air environment is the one actually making money with drones. Rick, your question for Matt. A lot of drones have cameras on them. What's the next big thing to go into a drone? Oh, gosh. It'll have to be Starbucks delivery, for sure.

Jason? I saw an ad for a drone that was seen crashed by the Mexico-US border. with like a bunch of crystal meth. It was like a breaking bad. Oh, man. Even better than maybe that's the next thing that goes into those drums. We're not endorsing that. No, absolutely not.

I just thought it was a funny story. Alibaba, ticker BAA, BABA. I know this is one that is still relatively new to the public markets. They have earnings coming up on January 29th. It'll be their second quarter they've reported. You know, this is – I would shy away from, you know, a little speculative Chinese small caps. But this is a behemoth in China. This is not speculative.

I mean, this is a very well-established business, very profitable business, with a very long-term focused leader in Jack Ma. So I think that with Alibaba, it's retreated back from its highs here recently. But I just, I love the long-term aspect there. I love the market opportunity. I love the long-term trend in e-commerce. And this is one that I think has a bright future ahead. Rick? Isn't that the one where you buy the company and you don't actually own the company? Yes, there are some ownership issues, some corporate structure issues, and some transparency issues that the investor would have to come to terms with before considering investing in a Chinese company. Jeff, just a little time left. What's your stock?

UPS. The shares are down about 9.5% Friday morning on a pre-announcement that earnings will miss expectations. The company is blaming their own pricing strategies, not package volume or revenue, but just their strategies so they need to change them. I would think that lower fuel costs are really going to help them this year, at least, if not the long run. So I'm going to take a look at them and see what's going on there. Rick? Do you think UPS needs a fashion upgrade? Oh, those brown trucks are timeless, man. And the brown outfits?

Yeah, timeless. I agree. Guys, thanks for joining us today. Thank you. Thank you. And that's it for this week. The show was produced by Chris Hill, who, at least as of now, sounds like Lego Batman. And we all agree.

That is awesome. Ricking Daw is the engineer and editor. I'm Matt Greer. We will see you next week.