Motley Fool Money - Microsoft’s Cloud Nine

Episode Date: July 20, 2018

Microsoft shares hit an all-time high thanks to strength in the company’s cloud business. Netflix falls on concerns over subscriber growth. American Express doesn’t get rewarded. And Skechers gets kicked around. Analysts Matt Argersinger, David Kretzmann, and Jason Moser discuss those stories and weigh in on the latest from eBay, Domino’s, and Papa John’s. Plus, Motley Fool co-founder David Gardner talks with best-selling author Dan Pink about the science of perfect timing.   Thanks to Harry’s for supporting Motley Fool. Get your Trial Set – go to Harrys.com/fool . Learn more about your ad choices. Visit megaphone.fm/adchoices

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know that switching razors isn't an easy decision. So they created a trial offer. Claim yours by going to harries.com slash fool. You need money. That's why they call it money. The best thing. Cool global headquarters. This is Motley Fool Money. It's the Motley Full Money Radio show. I'm Matt Greer, sitting in for Chris Hill this week. And joining me in studio, we have Motley Full analyst Matt Argersinger, Jason Moser, and David Kretzman. Gentlemen, welcome. How you feel like?

Hey, you. Pretty good, Mac. Thanks. Well, good. Well, on today's show, guys, we have Dan Pink talking timing. We're going to serve a couple of slices of pizza. One kind of good, one. Well, we'll get to it. Mac, pizza's pizza, right? Even bad pizza's still pizza, isn't that what they say? Yeah, yeah, it's a little more complicated. We'll get to that. And we're going to share some stocks on our radar. But guys, let's begin with earnings.

And this is all playing out against the backdrop where we have a trade war that could be growing. and a president who is openly criticizing the Federal Reserve. So why are we beginning with earnings? Because we're bottoms up investors. We focus on companies. And the company that we want to focus on initially, a little company named Microsoft. Jason, strong earnings, strong numbers across the board, especially in Microsoft's cloud business.

Absolutely. I do think that the most important takeaway from what Microsoft continues to do, quarter in and quarter out here, is the value in smart, forward-thinking leadership. I think that's what Satya Nadella has brought to the table, and it clearly can make all of the difference in the world. And we're seeing that play out. For a long time, Steve Balmer was steering the ship. And it seemed like he was very much the status quo and sort of just reactive to competing with Apple and the device wars. And really, they had no edge and no reason to even be trying to do that.

They were clearly getting smoked. And if you look at over Balmer's tenure there, I think it was, what, 2001 to 2014? The stock was essentially flat, which is just amazing when you consider how widespread Microsoft's reach is. And so Satya Nadella has had the wherewithal to focus the business on the greater opportunity in cloud computing. I think that when you look at the Azure product and what they've been able to do with it, revenue growth was up 89% for the quarter, excluding currencies. There is a humility with Satya Nadella. He's not about getting in front of the camera.

He recognizes, I think, a much more attractive, long-term revenue stream that I think is far stickier as well. And it also leverages this huge Microsoft basis already installed. I agree with Jason. I think Sadie Nadella deserves all the credit that he's been getting, not just by us, but by the investor media world at large. He's in an extraordinary job. I would also just offer, though, that Microsoft has always been a company with really unparalleled tool sets for developers, for office professionals.

And I feel like this trend towards SaaS, cloud, it played right into their favor. And so they've been writing some nice trends, and I think Saudi Nadella has done a fantastic job of making sure Microsoft has a great competitive position within those trends. I just wonder if we can give a little credit just to the fact that the world has changed a little bit in the sense that we've moved onto this cloud subscription-based software. And Microsoft was just already in a fairly good position to begin with. Yeah, I think Microsoft is a company that should be getting more. more attention from us and from a lot of other investors. But I think part of the reason it tends to

be overlooked is because it's not really a B-to-C, a business-to-consumer business to the same degree that Apple or Alphabet or Facebook or Amazon are. Microsoft is much more focused on the enterprise sales. That's what's driving the majority of the revenue. But agreeing with JMO and Maddie here, Sachi Nadell deserves a lot of credit. The underlying performance of the company is now stronger than ever. Well, think about the presence of Windows as an operating system, right? That's been far more resilient. I think that a lot of people thought it might be. I mean, for a long time, I think a lot of people were looking at Apple and thinking, oh, this is the software of the future, this is the operating system of the future. Maybe it was Google, right? This is just software for the masses. I tell you,

Microsoft's Windows operating system and the products they've built have been extremely resilient in the reason why. They're pretty good. I mean, let's face it, right? We all use that stuff here, and businesses around the world use that stuff there. It's very compatible. It's good stuff. I think they're just doing a great job of really leveraging that excellent product suite already. Okay, guys, as we wrap this up, let's talk about the race to a trillion-dollar market cap, because we know that's what everyone's going to be talking about this weekend. Right now, we've got Apple around 940 billion. We've got Amazon around 900 billion. We've got Alphabet, aka Google, around 830 billion. And we've got Microsoft, which has had an incredible run, around 800 billion, which company will be the first to one trillion. I'm sticking with my guns on Amazon.

I just feel like there are too many opportunities for them to continue to succeed. It's going to be a close one, though. It is. I agree. I think we've been on Amazon's case for at least two years about the first trillion-dollar company. Watch out for that earnings result next week because if it's really strong, Amazon could win the game right there. I'm going with Apple just a few more percent, and they're there, and they have the lead. So, easy choice.

Okay, guys. Well, another company that's had an incredible run, Netflix, slipping this week on earnings. Now, Matt, some concerns over subscriber growth. Yeah, a little bit slower than the company was expecting. And I think as a Netflix shareholder, which I am, I mean, you're going to have a quarter like this here and there where the company just makes a projection and they miss it. But this happens to be the first one they've missed since the beginning of 2017. So it feels a little rare, and the market reacted negatively to it, as you might expect. I think what's more concerning makes me a little less comfortable with the results was the fact that they really almost doubled their spending on marketing year over year.

And the fact that they did that and had kind of a tepid result, especially on the domestic side, makes me wonder, you know, you have a company that's spending so much now on marketing and content. And if subscriber numbers continue, the growth there continues to trend a little down, you expect it will over time naturally, but if it trends sharply lower, you've got a very, very expensive stock. And how much of that is in preparation and in reaction to Disney, which is going to unveil its streaming service next year? Well, yes. I mean, not only that, you know, we know that Comcasts, is now out of the bidding for Fox. We're assuming Disney, of course, it gets through all the regulatory challenges. It's going to require Fox pretty soon, and that comes with a controlling stake in Hulu,

which I view as a pretty substantial platform, a competitive platform. So, yeah, I think Netflix is playing, has to play offense. It's going to continue to spend a lot of capital. It has to. And so if we don't see the subscriber number, growth numbers trend higher again, you have to start worrying. I think the pricing power question really comes into play now. And I mean, I understand Netflix's strategy from the very beginning has been to cast this big wide net to have a little bit of content for a lot of different people out there. And I appreciate that they're able to use their data to do that. It's obviously not cheap.

Look at HBO. I think that's been the natural comparison there. And we're seeing HBO trying to maybe think about becoming a bit more like Netflix in growing its content library out. I really truly hope they do not because when I compare HBO's content to Netflix's content, I mean, they're worlds apart. I think HBO is far superior. So for me, really, with Netflix, it's all about whatever show keeps people coming back for more.

But if they don't have that quality content on an ongoing basis, I wonder. My question is, how high can they push up that price on the subscription? Because I feel like the more they do that, the more they have to kind of prove their case. And it's becoming a little bit less clear, perhaps, than it was a couple of years ago. Yeah, and speaking of content, I think longer term, the ultimate. question here is how high does that content spend have to go for Netflix to continue, basically fueling that flywheel to attract new members with new content and retain members? Because right now, this year, they're going to spend about $8 billion on content.

Where does that plateau? Is it $10 billion? Is it $20 billion? Is it $30 billion? The higher that number is, the more subscribers Netflix needs to accumulate to justify $160 billion market cap today. So if you're an investor, that's what you want to watch. And guys, let's talk the week in pizza. The shares of dominoes falling on earnings, disappointing revenue here, David. Now, long-term investors still doing okay.

When you run the numbers, shares of dominoes up more than 300% over the last five years and 2,500% over the last 10 years. Yeah, if this is a disappointing quarter, by all means, keep them coming. Same store sales domestically up 6.9%. You'd be hard-pressed to find any restaurants putting up numbers close to that. So, obviously, this is the first quarter where Patrick Doyle is no longer CEO. Newcomer, Rich Allison is now heading up the company. He comes with extensive experience on the international side of Domino's, which will increasingly

become the focus for the company. This quarter, they crossed 15,000 locations worldwide, but that still puts them in the number two spot behind Young Brand's Pizza Hut chain. So going forward, I think there's still room for them to open more stores globally. Same store sales. Performance continues to be very impressive, both. domestically and international, they continue to invest and really spearhead that technological innovation when it comes to the whole pizza space. So I think there's still a reason to be optimistic.

Well, forget the stores. I mean, how about that Domino's Hot Spot? Have you seen the commercials for that? No. So it's like these locations around cities everywhere. You could just be like standing in the middle of a park and then you recognize that you're in a Domino's hotspot. You can actually order the pizza and have it delivered right there. So, I mean, they're expanding their delivery network considerably, I think which is just phenomenal. be honest. That is brilliant. I mean, we can put a man on the moon, and now I can order pizza from anywhere. Wherever you are. That's innovation, baby. Love it. Well, let's stick to the subject of pizza, because Papa John's, what a mess. Okay, last week, founder John Schnauder

resigned his chairman after admitting to using the N-word on a conference call. Okay, so I think people thought that was the right move. This week, Schnauder said it was a mistake, and he said the board's decision to remove him as chairman was based on rumor and innuendo. David, he's still on the board and he still owns a big chunk of the company. Twenty-nine percent of the company is his ownership. And also this week, Forbes published an article, The Inside Story of Papa John's toxic culture. So it's really coming out that these issues aren't just limited to the past year or two with all this stuff with Schnaudder, but potentially going back a lot further and with other leaders in the company. And it's also come out that Wendy's and Papa Johns over the past few months

before these most recent scandals came out, they'd actually been in talks to have some sort of merger or acquisition. And I think that makes sense because when you have such a polarizing figure with Schnauter still on the board, still owning so much of the company, perhaps the best step forward for Papa John's is to sell and no longer be an independent public company. And I think it makes sense because Wendy's actually owns part of Arby's, which earlier this year acquired Buffalo Wild Wings for $2.9 billion. Right now, the enterprise value for Papa Johns is $2.3 billion. So it is in that reasonable range where someone like a Wendy's could make that acquisition and bring pizza into their portfolio. Well, yeah, the case with Papa John's is interesting because this is the

downside of having a founder, CEO, who owns a substantial stake in the company. And as foolish investors, We love to see that. We tend to bet more on those companies. But when it's a CEO that does these kinds of things, and your investment thesis evolves to depend on this actor who then becomes a bad actor, it really hurts you as an investor. It can be a double-edged sword. They say it's the culture eats pizza for breakfast.

Oh, I like it. Classic same. Wisdom. Look at that. You're not going to get that anywhere else. Okay, guys, shares of American Express down on earnings. Now, we've got higher consumers spending here, but that was partially offset by an increase in the cost of rewards. I love me, some rewards.

You got to keep those cardholders. And as American Express cardholder, I, too, have found a lot of my spending going over towards my Amazon Prime Visa card. I think that American Express has been a little bit lost in the conversation of modern day money movement, partly because it's been so reliant on a specific demographic. for so long. It's tremendous brand awareness, but it was a brand that spoke to the wealthier demographic, right? People who spend a little bit, perhaps, a little bit. And I mean, that I say that in the nicest sense of the word, because I think they're doing a good job of trying to expand that demographic and become a card for more people, but there's a lot of competition out there

already. Now, with American Express, because of their closed-loop system, they are a bank holding company, so they are a bit more like a bank than those other cardholders. In theory, they should witness better times here. As interest rates rise a little bit, as the economy is strong and people are spending more, the problem is we're in a trend right now where merchants are looking to the lower cost providers, right? If you're a Visa or a MasterCard or a Square or even a PayPal, you're providing those merchants with a lower cost transaction. American Express is providing them on a higher cost transaction. Now, the argument is that they can get higher spenders, right? Bigger spenders, more money for merchants. That's a tough case to prove in today's economy. And so I

I think that American Express is probably going to have to start ratcheting back those merchant fees a little bit. That will likely play out of the profitability company. It's a good business. I just don't know that I put at the top of the list in this payment sector. And guys, if you think you're having a rough day, you might want to hang out with Skechers. Shares of the shoe company down big on Friday on earnings. David, what's the story here? Well, revenue is growing, but earnings are not.

And that's really been the story with Skechers for the past few years. This is still a profitable business. They have $800 million in net cash. They're producing really strong free cash flow. But over the past three years, revenue has gone up about $1 billion, but earnings are still flat or down over that same period. Now, management says they're investing in international distribution centers. They're dealing with the strong dollar, higher taxes in some regions.

So they've managed to come up with a lot of excuses over the past few years. But as an investor, I think looking at... longer term. There's still reason to be optimistic here. The stock is not very pricey at this point. So the valuation is reasonable. Like I said, the cash situation is strong. After today's drop, their net cash of $800 million makes up about 20% of their market cap. So I think there is some cushion there. But looking forward, you want to eventually see earnings catch up to that revenue growth. Okay. Well, coming up, some stocks on our radar. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Matt Green.

We're sitting in for Chris Hill this week, and I am joined by Matt Argersinger, Jason Moser, and David Kretzman. Guys, shares of eBay down big this week on earnings. Now, Matt, eBay blaming the strong U.S. dollar. Who do you blame? I don't know where to start with this one, Mac. I mean, I don't understand how a business like eBay can have overall sales volume grow up just 7% when a company like Amazon's e-commerce business is growing over 20%. Walmart's e-commerce business is growing over 30%. And here's eBay, one of the premier brands for online retailing, just up 7%. And by the way, it's not like they're not trying sales and marketing expenses. We're up again year over year. So it's a conundrum with eBay. They should be doing a lot better,

yet I see them, for example, sell stakes in Mercado Libre and FlipCart. So they're basically giving up on international expansion. I see them in the past overpay for things like Skype. You know, and they invest PayPal several years ago, and PayPal's up 100%. Meanwhile, EB's done nothing. So it's just this, it's complex for me. I don't know what fixes this. Yeah, for me, it's baffling what their strategy is because they've gotten rid of Mercado Libre and now announced this quarter.

They're getting rid of Flipkart over in India. And instead, they're going to be focusing on their homegrown eBay platform in those regions. And to me, it's like, okay, the eBay platform in the U.S., your core market is losing market share. It's struggling against Amazon and Walmart. Why on earth would you be trying to duplicate, double and triple down on that strategy internationally? Because they're going to make it up on volume. Yeah, and they're counting on that weak dollar to come through. Fingers crossed there. But to me, it seems like eBay should be focusing on actually doubling down on those acquisitions, having a stake in Mercado Libre, the flip cards, looking at acquiring an Etsy or a wayfair in the U.S.

to really differentiate that platform because what they're doing now is losing market share. Yeah, and it's remarkable. You go back 10 years ago, and I think most investors, might have even picked eBay to win kind of the war between eBay and Amazon. And look what's happened. He's weird. I've never, ever used eBay ever in my entire life. It's not weird. It's not weird.

But I loved. I was a longtime eBay shareholder, and I thought at one point eBay was the future. It should have been. It really should have been. Well, it is the future, but not in a big way. Once that dollar weekends, we're back in the game. Okay, guys, we have around a minute left for stocks on our radar. So let's go around the horn.

David Kretzman, what's your stock? I'm looking at Instructure, that's ticker symbol, I-N-S-T. This is a software-as-a-service or a SaaS company focused on learning, education, and performance management software. The company has a highly rated company culture. They're growing quickly, revenue growing over 35 percent, a healthy balance sheet without any debt. And they have a reasonable valuation compared to most other SaaS companies these days. A $1.6 billion company, it seems to be overlooked in what's become an increasingly frothy SaaS space. Space. Sass. Yeah, I'm going to go with Etsy, ticker ETSY. I think there's great brand recognition

here still growing. Capitalite business model, no inventory on the balance sheet. Already nice and profitable. I think this is an e-commerce play that can exist in the age of Amazon. Maddie. ICHE, ticker IQ, I've talked about it several times on this show. China's leading video streaming service, recent IPO. No reason it should have shopped to 46 bucks. No reason it should have fallen back recently to $32. I just think now at the price it is today, it's worth another look. All sound intriguing, but I got a purple fool cap on Etsy. Coming up, when should you do what you do? Dan Pink talks about the science of perfect timing. Stay right here. You're listening to Motley Full Money. Thanks to Harry's for supporting market

foolery, Harry's founders were fed up with overpaying for expensive razors with unnecessary features. So they came up with a better way. By selling directly to you over the internet, Harris can offer their blades at a price much lower than the leading brand. It is a wonderful, close, comfortable shave. Dan Boyd, do you have any experience with Harry's? I certainly do, Mac. I got their kit a while back, and I love the razor, and I love the shaving cream. But the after-shave gel is the best thing about the whole kit, because my fiancé absolutely loves the way it smells. I agree with your fiancé. The after-save gel is awesome. Now, Harry's knows that switching Razors is not an easy decision, so Harris has a special trial offer for Motley Full Money listeners.

It's a $13 value that includes a weighted ergonomic handle, a five-blade razor with a lubricating strip and tremor blade, rich lathering shave gel, and a travel blade cover. Listeners of Motley Full Money can redeem their trial set at Harries.com slash Fool. Now, make sure you go to harries.com slash fool to redeem your offer and let them know Motleyful Money sent you to help support the show. Welcome back to Motley Full Money. I'm Matt Greer sitting in for Chris Hill this week. Now at our Motleyful member event back in June, Motleyful co-founder David Gardner interviewed best-selling author Dan Pink, one of our favorite Motley Full Money guest. Pink has written extensively about work, about management, motivation, behavioral science. He's the author of six books, including

a whole new mind, drive, and to sell as human. And Dan's TED Talk on Motivation is one of the most watched TED Talks of all time. Now, Dan and David cover a lot of ground in their conversation. They talk about the changing nature of work. They talk some AI. And yes, they talk about the value of right brain thinking. They also talk about when and how to take breaks. And, of course, they talk investing and the big one that got away. David kicks things off by asking Dan Pink, about his new book, When, the scientific secrets of perfect timing. So let's begin right away with your new book, Dan, when? I've seen you speak about it a couple of times.

It's already influenced me. I want you know I had an age-appropriate medical procedure that you're supposed to have after the age of 50 recently. It starts with a C. I bet some of you have had this. And I intentionally schedule it for the morning because that became a big deal to be thanks to your book. Could you just start right there,

talk about, well, the idea that when we do things matters as much or more than how we do things. And when you look at a typical day, Dan Pink, what should we be doing when? So the last book I wrote came out a few months ago. It's called When. It's about the science of timing. And the main point is that it's just that. That we tend to think of the timing, the decisions we make about when to do things. We make those decisions based on intuition and guesswork.

That's the wrong way to make them. We should be making them based on what turns out to be this very rich body of science. across multiple disciplines that give us clues, evidence, data to make these decisions about when to do things in a smarter, more strategic way. And one of the things that you see, especially in health care, is, I mean, as your friend, I'm glad that you got your colonoscopy in the morning, because doctors find half as many polyps and afternoon exams as they do in morning exams for the same population. Anesthesia errors, four times more likely at 3 p.m. than at 9 a.m. hand washing in hospitals, which is not that high to begin with, goes down considerably in the afternoon. And one of the things that the science of timing tells us,

is at a broad level, is that our cognitive abilities don't stay the same throughout the day. Our cognitive abilities change over the course of a day. The difference between the daily high point and the daily low point can be significant. And when we should do things depends on what it is that we're doing. And the evidence is pretty remarkable, especially on health care. But you also see the same effect in education. You see it in corporate performance. You see it in the markets.

When we take breaks during the day, what kinds of breaks should we be taking when? The science of breaks is where the science of sleep was 15 years ago. 15 years ago, it was a badge of honor in some cases to come in and say, I, I pulled an all night or last night. I'm massively sleep deprived. I'm so committed to this organization that I'm only getting. by on three hours of sleep. And back in the old days when I was working in organizations, I actually used to admire that. I used to feel bad about myself because it was really hard

for me to do that. And now, 15 years later, once we understand the science of sleep, we say to that guy, and it's always a guy who got three hours of sleep or pulled two consecutive all-nighters, you're not a hero, you're an idiot. Go home and get some sleep. You're hurting your performance. You're probably hurting everybody else's performance. And the science of breaks is where the science of sleep was. What we know about breaks is the following. We should be taking more breaks, and we should be taking certain kinds of breaks. At a broad level, this is something that I got wrong. I always believed, I'm not a good break. I have not been a good break taker. I always believed that professionals, that amateurs took breaks and professionals didn't. And that's 100% wrong.

That's as wrong as a statement can be. It's the exact opposite. Professionals take breaks, amateurs don't take breaks, and when I can finally steer this 18-wheeler to actually answer David's question directly, what we know is about breaks is the following. There's some very good research that give us design principles about what kinds of breaks to take. Here's what we know about the right kinds of breaks to take. One, something is better than nothing. And so even micro breaks can improve your performance. Microbreaks as short is something like something that I do sometimes, which is called 2020, which is every 20 minutes, look at something, if you're working computer every 20 minutes, look at something 20 feet away for 20 seconds.

Even that can actually improve alertness and mental acuity. We know that, so something is better than nothing. We know that moving is better than stationary, big time. So I think that's become pretty well known. We know that social is better than solo, that breaks with other people are more restorative than breaks on our own. and in fact the remedy in the study by Katie Milkman at Penn and Brad Stats at UNC, where they showed that deterioration in handwashing in hospitals,

the remedy for that that got handwashing back up was to give nurses more breaks and to encourage them to take social breaks, breaks with other nurses. That ended up getting hand washing back up. We know that outside is better than inside, and we know that a fully detached is better than semi-detached. So leave your phone behind. Don't talk about work. and I really, I think the science is clear enough that if the U.S. workforce,

I truly believe that there would be an uptick in productivity writ large if white-collar workers every afternoon took a 10-minute break, walking around outside with someone they liked, leaving their phone behind and talking about something other than work. I think that that regular habit would actually be a massive productivity enhancer for no cost. Whenever you did first come up with this idea, let's go back to that Dan Pink. Now looking at the 2018 Dan Pink, who's already written the book and knows it. How does this Dan Pink surprise or look different to that Dan Pink?

How does this book change your own habits? Oh, my God. This book probably more than any book I've written changed how I do things. So truly, I'm not joking around about this medical stuff. My younger daughter is having a wisdom, 19-year-old is having a wisdom teeth taken out. And it's like there's no question in our family what time of day she's getting her wisdom teeth taken out because she's going to go under general anesthesia.

It's like she will absolutely, like I will stand in front of the door if preventing her from leaving our house if there was an appointment scheduled in the afternoon with general anesthesia for one of my kids, period, full stop. We changed, my mother-in-law had a heart procedure six weeks ago. And my wife, who was now,

navigating things for her, negotiated with the hospital to do something out of the ordinary and do the procedure in the morning rather than in the afternoon. I mean, so this is like for real on that one. So I also changed the way that I conduct my own schedule because one of the things that we know about the pattern of the day is that we go through the day in three broad cycles. There's a peak, a trough, and a recovery. And we do different things better at different points on that cycle. So during the peak, which for most of us is the morning, for night of it's much later in the day. We're better at doing analytic work, work that requires heads down, focus, attention, and

energy. And so I changed my own schedule so that I do all my writing in the morning because that's my best time of day. And I will, on writing days, I will not bring my phone into the office. I will not check my email. I will not take any phone calls, not do anything until I hit that number. And so for this book, I was really, really rigid in how I wrote it based when I got a wind of this research. So I would come to the office every morning, shut everything down, give myself a word count, and not do a thing before I hit that word count in the morning.

So I would probably wrote this book 90% of the words in this book before noon. And actually, no joke, this is the first book I've delivered on time. So broadening it a little bit, Dan, obviously so much of your writing and your work has been about the changing nature of work, of motivation. But let's go to work for a sec, changing nature of work. So automation. Oh, yeah. AI. How do you think AI will change work?

It's a great question. I think we don't know. I think we can use certain ways of reasoning through this issue. So as it turns out, I wrote a book about 11 years ago called A Whole New Mind. And the argument behind that book was that certain kinds of abilities that propelled you to the middle class, what we can think of as SAT spreadsheet abilities, logical, linear, sequential abilities, abilities that were metaphorically left brain. My argument was that those abilities were becoming commoditized.

They were easy to outsource. They were easy to automate. And that was putting a premium in these kinds of abilities, abilities more characteristic of the right hemisphere of the brain, artistry, empathy, inventiveness, big picture thinking. And what I did in it, and I have a chapter on automation in that book, about how things are, you know, how a lot of kinds of left brain functions are being automated. So you have, I grew up in the American Midwest when the rust belt was rusting, and that was a change in the structure of work there, and even in the kind of advice that parents, middle class parents gave their kids, that you couldn't, like, routine factory jobs, factory jobs that were basically about doing repetitive tasks over and over again were no longer the path to the middle class.

So parents told their kids to become accountants or engineers or lawyers, and the argument was is that a lot of the actual tasks in those professions were actually at risk of being automated and outsource because they were routine. And so an example would be something like, you know, basic tax preparation and turbotax. And we often get this wrong. So you have every year, every April, CNN does a story about chartered accountants in Manila doing processing American tax returns for $400 a month. and some sad sack, a personal accountant in Sheboygan, Wisconsin, who is losing business as a consequence of that. And they never mentioned anything like TurboTax.

I mean, any of you do your taxes on TurboTax? Anybody? Yeah, look at that. So you're the people with accountant blood on your hands. Like, that's what's killing accounting jobs. So you have the automation of these kinds of white-collar tasks and the outsourcing these white-collar tasks. The point of this is that the rise of AI was far steeped,

deeper than I would have expected. And so I did an... So, for instance, I wrote about how, like, empathy, the our ability to read facial expressions is something that is very, very difficult to automate. And it turns out it's actually less difficult than we thought. And so that that kind of capacity, which I thought would be impervious to that,

whoa, actually, you might be able to automate that. So I think that the world of AI, to make a long story short, which I've never done in my adult life, is this, that I think it's going to have an effect. I think it's going to be neither utopian nor dystopian. In 1999, I ordered on eBay a bunch of books by futurists from the middle of the 20th century who were projecting out to 2000.

I was going to do a piece on this. What did people think was going to happen in the year 2000? And basically, the distribution of these texts, these pundits, these thinkers, was this. you had about, you know, 45% of people predicting massive dystopia, charred lands, maybe 40%, charred landscape, you know, widespread unemployment because of these things called computers. Then you had about 55% of people saying, you know, utopia. We're going to only be able to have to work five hours a week.

The rest of it's going to be leisure. Everyone is going to be having sex without consequence. It's going to be, you know, this incredible utopian vision. And then you had about 5% of people saying, I think it'll be a little better. And it turned out that the 5% were the ones who were right. And so I sort of using that as a heuristic for figuring, analyzing this thing, I was like, yeah, you know what?

It's probably going to make things a little bit better. There's going to absolutely be some disruption. There already is. We're not in this country taking, we're doing a terrible job of just being willing to leave people behind. But I think that AI is going to replace some jury tasks. And I think that what we're going to do for a living are things that augment machine intelligence rather than compete with machine intelligence. But I don't see a utopia, nor do I see a dystopia. I see things basically a little bit better with some social consequences that it's a political decision whether we address.

Coming up, we continue our conversation with Dan Pink, who talks about the big one that got away. Stay right here. You're listening to Motley Full Money. The Motley Full Money, Matt Greer sitting in for Chris Hill this week. And now more from Motley Fool co-founder David Gardner's conversation with bestselling author Dan Pink, whose new book is When, The Scientific Secrets of Perfect Timing. Dan, on my podcast, Rule Breaker Investing this coming week, we're going to tell stock stories. A lot of people talk about story stocks.

To reverse it and tell stock stories, you have an awesome stock story. And I'm just going to spot you up with it. And this is going to appear on my podcast. So, you know, start with once upon a time, once I spot you up. But this is the one about a guy you got to know through social media who had an idea. So once upon a time in the middle of the first decade of this century, I wrote a book called A Whole New Mind. It had an orange cover. And one of the ideas in the book, which I'm not sure is totally right anymore, but is that I had this argument that the MFA, the Masters of Fine Art, the MFA is the new MBA.

The MFA is a new MBA because a lot of MBA skills can be outsourced and automated. The skills of an MFA, the masters of fine art, are harder to outsource and harder to automate. Therefore, it would be, they would be more valuable. The MFA is the new MBA. That idea got me invited to a lot of art and design schools. Because everybody loves confirming their own biases. And in the course of going to this, I went to the Rhode Island School of Design, one of the premier art and design colleges in America,

just an incredible institution. And there I met a young man. I'm not going to even tell you his name. I'm just going to tell you, I met a young man who came up to me after the speech and talked to me a little bit, and then sent me an email. And afterwards, and asked me some questions,

and I responded to the email. And he seemed like a good dude. This guy, I liked this guy. I thought he was super creative. And maybe a year later, two years later, he emailed me, and he said, I thought he was just a super creative guy. And he said, I got this crazy idea for a business, and he told me about the business, and I thought it was the most absurd.

It's just an absurd idea. But as a way to raise money for it, because he was a pretty skilled designer and a very creative guy, he decided, this is now 2008, he decided to do a set of limited edition cereal boxes. This is going to sound weird. Limited edition cereal boxes where he and some of the same. of his design colleagues created these two boxes of cereal. Literally, it had cereal in it, and the box, one brand was called ObamaOs, all right, hope in every box. And the other one was called Capon, C-A-P-A-P-A-P-N, all right, Capon McCain's, all right? So one was for McCain, and they said, we're going to do these things, to raise a little bit of money,

we're going to do these limited edition cereal boxes. And so there are actually works of art in the limited edition, and each cereal box had stamped on it, you know, number four of 500, number six of 500 or whatever. And I thought, that's pretty good. And these things, and I'm actually, I mean, I actually really enjoy fine art, particularly conceptual art. Like, I like going to the Hirshorn,

and I like this sort of more, utre, forgive my French, kinds of art, and these kind of wacky things. And they were selling it, and I like this guy. And I said, this guy could be a famous artist one day and to be really cool if this guy were like the next Andy Warhol or Jeff Coons or something like that, and I had one of his early pieces.

And so for a tiny little amount, you know, literally, I think there was like $75 a piece. I bought these things. And I said to this young man, this is totally cool. I mean, you know, it's cool that you're raising money for this business. But, you know, I'm buying these things because I think you're going to, you could probably be a well-known artist, and this is my investment.

but I would never put a scent into your company. And so I have in my office, and I think David might have seen these, I have in my office these cereal boxes, because they look really nice. They're super cool looking. And so it's Obama owes Captain McCain. And on the top of it, it says, you know, a product of air bed and breakfast. Thank you. So, you know that old, like, you know that old line?

like, you know, the country song. It's like, you know, you got the coal mine and I got the shaft. The, um, the, uh, so I didn't want to say his name to tip it, but is Joe, a fellow named Joe Gebbya, who is now like, I don't know, what, the 41st richest person on the world. And, and, um, so Joe got the billion dollar company that's going to go public next year, but I've got my cereal, man. Dan Pink's new book is When, The Scientific Secrets of Perfect Timing. And you can hear David's entire conversation with Dan Pink on David's Rulebreaker Investing podcast at podcast.com.

You can also find our other Motleyfool podcast. And we always love to hear your questions and comments at Radio at Fool.com. You can find us at Radio at Fool.com. People on the show may have interest in the socks 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. That's it for this week. The show is mixed by Dan Boyd. I'm Matt Greer. I've been sitting in for Chris Hill, who is getting some much-deserved R&R, but Chris will be back in the saddle next week. Welcome back, Chris. Thanks for listening, and we will see you next week.