Motley Fool Money - Mid-Year Review, Stocks with Upside Potential

Episode Date: July 1, 2022

Halfway through 2022 it's time for investors to see where we've been and what to look for in the 2nd half of the year. (0:30) Ron Gross and Jason Moser discuss: - Investing headlines for the 1st half of the year - Early frontrunners for "CEO of the Year" - Who needs a stronger 2nd half of 2022 - 3 stocks poised for upside (19:00) We're dipping into the vault for one of our favorite conversations. Recorded in front of a live audience, best-selling author David Epstein discusses Tiger Woods, predictors of success in the business world, and other takeaways from his book Range: Why Generalists Triumph in a Specialized World. Our free investing starter kit includes research on 15 stocks and 5 ETFs. Get a copy by going to http://fool.com/starterkit Stocks discussed on the show: PFE, TTD, SBUX, TWTR, TGT, DIS, NFLX, DOCU, ADBE, MSFT, ZM, MAR, ABNB, UBER Host: Chris Hill Guests: Jason Moser, Ron Gross, David Epstein Engineer: Dan Boyd   Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone, I'm Charlie Cox. Join us on Disney Plus as we talk with the cast and crew of Marvel Television's Daredevil Born Again. What haven't you gotten to do as Daredevil? Being the Avengers. Charlie and Vincent came to play. I get emotional when I think about it. One of the great finale of any episode we've ever done. We are going to play Truth or Daredevil.

What? Oh, boy. Fantastic. You guys go hard, man. Daredevil Born Again, official podcast Tuesdays, and stream Season 2 of Marvel Television's Daredevil Born Again on Disney Plus. We've got some early voting on CEO of the year and a few stocks that are poised for upside. Motley Fool Money starts now.

That's why they call it money. The best thing. Cool global headquarters. This is Motley Fool Money. It's a Motley Full Money radio show. I'm Chris Hillen joining me this week's senior analyst Jason Moser and Ron Gross. Good to see you as always gentlemen. Hey, hey.

I'm doing Chris. It is our mid-year review special. We're recording this a little earlier than usual a little before the start of the holiday weekend. So I just wanted to timestamp that run in case there's any late breaking news. With that, Jason Moser, let me start with you. What is your business slash investing headline for the first half of 2022? Well, Chris, I'm going to take you back to our 2022 preview show. When I offered up a, I think, somewhat unpopular, I wouldn't be surprised if, you know,

and I said I wouldn't be surprised it if next year we have a down year in the market. I said, I do think we're going to see some level of inflation impacting our economy. Stimulus, I think, is going to become a thing of the past. We're going to see interest rates continuing to go up. And, Chris, we are in the throes of a bear market now. So I don't mean to serve as a B in anyone's bonnet. But, you know, unfortunately, the market is down. I think that that really is the headline here, right?

It's the bare market. What's going on? And when are we going to get ourselves out of this? Now, I also said, I don't think, that doesn't mean you should stop investing, right? You shouldn't, and I still stand by that. If you look at the data, you go back to 1929 on average. Since 1929, bear markets, the S&P has lost 36%. Now, we're at around 22% in the S&P now.

Granted, the NASDAQ has lost around 30%. So we could be in for some additional downside. Who really knows? I mean, there is a lot going on in the world impacting our economy that's simply out of our control. But I will encourage investors to stay the course and try to stay optimistic. You look back to 2008, right, when the market lost 36.5% just in that year alone, it then went on to return 25.9% and 14.8% in 2009 and 2010 respectively. So my point there, if you remember the mood in 2008, I mean, it was dour to say the least. And remember what Shelby

Davis said. I always go back to this. You make most of your money in a bare market. You just don't realize it at the time. So as bad as things feel right now, remember, they will get better. But the bear market, that feels top of list for me here so far this year. Ron, so Jason admitting that he caused this bear market by speaking it into existence on our preview show. What's your headline for the first half of the year? Well, since Jason's bear market headline basically covered everything, I will still drill down for the listening audience on inflation and recession, 8.6% inflation reading in May, highest increase since December in 1981. What a good year that was. Consumers definitely feeling the pinch. Fuel oil up more than

100%. Average price of gas per gallon around 492, which is actually down a bit. Maybe we have a trend of somewhat lower prices for fuel. But the price of everyday foods like cereal and eggs are up double-digit percentages as well. Wages not coming close to keeping up with inflation. And the Fed is raising interest rates aggressively to slow the economy and bring down that inflation. They're trying to engineer a soft landing. Investors are concerned that it's going to throw us into a recession. JPMorgan's Jamie Diamond said we should brace for an economic hurricane. Just recently, Fed Chairman Powell acknowledged that recession is, quote, certainly a possibility. So we're We're going to have to wait and see what they engineer here. Hold on tight, though, and everything

that Jason said I would agree with about investing in good times and bad, as long as you have a long-term horizon. Ron, let me stick with you. Long-time listeners know at the end of the year, we do our full year-in-review show. We hand out the award for CEO of the year. Who is your early frontrunner at this point? This could be controversial because it's big pharma, but I like Albert Borla from Pfizer. Last year, obviously, his company's vaccines basically helps save the world. That's pretty special, I think. Pfizer vaccines continue to get FDA approval, additional boosters, younger children. He's using a lot of the cash generated during COVID to aggressively make acquisitions to position the company in a good place for the future. I would expect to see,

I would expect to see him buy back a bunch of stock. Stock is trading only at stake. seven times earnings. In May, the company said it will make 23 of its medicines. Many of them are patented, available to 45 low-income countries at a what they call not-for-profit price. So they're not going to make any money on those medicines. Great to see, especially in the age where big farmer certainly gets criticized on the pricing side. And Borla said he would want to reduce by 50 percent the number of people on the planet who cannot afford our medicines. I like that mission as well. Jason, who's your early frontrunner for CEO of the year? Yeah, I'm going to give a hat tip to the trade desks, Jeff Green. I think stock performance aside, I mean, all stocks out

there are getting pummeled these days. And so honestly, we need to take a little bit of a longer view here, I think, in what he's done setting this business up for success. But if you look at the tailwinds that are forming an ad-based video on demand, he's really been building this business to capitalize on that opportunity. And as inflation persists, consumers show they're more than willing to use Avod, right, that ad-based video on demand. And virtually everyone out there now is developing an ad-based offering with programmatic advertising playing a much larger role. And programmatic advertising plays right into the trade desks specialty there.

Like I said, he's been setting this business up over the past several years to capitalize on this. He's developed partnerships with Peacock, Paramount Plus, Discovery Plus, Sky, just announced a partnership with HBO Max. There'd be some questions as to a potential relationship there with Netflix as they sort of assess the landscape on how they're going to roll out their ad-supported model. You've got Disney coming out with an ad-supported model as well here very soon. So, you see the tailwinds growing there in ad-supported video, connected TV in general, becoming a bigger part of the trade desk business, now accounting for better than 40 percent, overtaking

mobile this most recent quarter. And the company just has a track record. of really doing right by their customers, right? The customer retention is still over 95%. And that is the eight consecutive years now. They've maintained that metric. So for me, you separate yourself from the stock price. You look at what Jeff Green has done for this business to get to this point. It really feels like they're in a good position going forward. Ron, I don't think any of us are surprised that inflation continued through the first half of the year. But we did have some surprises so far. What would you say is the most surprising company news. One thing that shocked me a bit was when in April, Starbucks announced that Kevin Johnson was

out and Howard Schultz was back in as interim CEO. The announcement seemed very abrupt to me, especially because a new CEO search hadn't even begun yet. It felt like something was going on that we weren't really privy to behind the scenes. It was surprising to me. Starbucks had hit an all-time high in July of 2021. Johnson executed several strategies that were successful. He expanded in China, expanded the rewards program. He navigated the pandemic pretty well. He improved the technology at the company. And yes, he was criticized for his handling of potential unionization of some of the stores. His compensation package had been scrutinized quite a bit. So I was overall pretty surprised. Sheltz immediately suspended the company's stock buyback program,

choosing to refocus on investing in people and stores. Obviously, Schultz knows this company very, very well. I'm sure it's in good hands, but that announcement seemed rather abrupt and surprising to me. Jason, anything surprised you so far this year? Yeah, a lot of things, but I think one thing that really stands out so far is Elon Musk announcing he wants to buy Twitter. That really was kind of like know, what? But, you know, it's turned into quite the soap opera. I think we all initially were somewhat skeptical that this would actually work out or play out the way it has. I think, actually, though, it looks like it may work, and it feels like he could give Twitter its best shot. He says he has no interest in being the CEO, but he wants half of the world on Twitter.

Now, that's a big goal, but that's also his style, right? And he's a proponent of free speech, but by the same token, he notes that it doesn't mean Twitter needs to promote that bad stuff, right? It's just the enforcement of these policies that they have that they seem extremely arbitrary. And so just tightening that up, getting rid of the bots, it seems like there's a lot there that he could clean up to make it a better experience. The board has unanimously approved it. And you look at Jack Dorsey, one of the founders of the business. Speaking of Twitter, he said, and I quote, it has been owned by Wall Street and the ad model, taking it back from Wall Street is the correct first step, end quote.

And I feel like there's something to this. I think before anything happens to make Twitter a better platform for all, it really feels like it will function better out of that public company spotlight, so to speak. So it's a polarizing subject, I'm sure. I actually wouldn't mind seeing this deal play out because I do feel like he has the opportunity to make Twitter a much better platform because it certainly seems like a very resilient and useful one. Up next, we're going to have some predictions about the second half of 2022. So stay right here.

You're listening to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. So don't buy ourselves stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Ron Gross. It is our mid-year review special. All right, Ron, we're going to play a round of fill in the blank.

For this first one, you can go with a company, a C, or something else altogether. Blank really needs a strong second half of the year. I'm got to go with Target, or Targe as it's called in my family. Stocks down 46% from its 52-week high. A couple weeks ago, Target explained that it had a merchandise problem. It over-ordered big, bulky home goods like patio, furniture, TVs, kitchen appliances. Those items are costly to ship. They're costly to store in one. warehouses, basically from a merchandising perspective, they thought the COVID purchase patterns would continue. They were wrong. Inventory was up 43%. They issued weak guidance. Stock got whacked. A week later, they said it was even worse than expected. So Brian Cornell, the CEO,

said, we have to be decisive. Get out in front of this. Make sure this doesn't linger through the back half of the year. So they're ripping off the Band-Aid. They're severely cutting prices. they're getting rid of excess inventory in the hopes that they can put this behind them. At the same time, they raise their dividend 20% as to say, we're okay here, folks. That yield is now 3.1%. Shares are trading at only 15 times forward earnings. Don't sleep on target. As a shareholder, I hope you're right, and they have a strong second half of the year.

Jason, what about you? Yeah, it feels like Bob Chapeg, CEO at Disney. He needs a strong finish to the year, right? All stocks are down, as we've noted, but Disney being down 40 percent seems excessive, giving the company's assets and diverse revenue streams. And the fact that people are back out traveling and life is more or less back to normal. You look at the numbers trailing 12-month revenue is up 10 percent from 2019. Granted profitability is still recovering, but domestic park per capita spending was up

by more than 40 percent versus 2019, which is also very encouraging. And they believe they're still on track to reach that milestone of 230. 260 million Disney Plus subscribers by fiscal 2024. And as I mentioned, they're going to be rolling out an ad-supported version of that service. But of course, he got into hot water earlier in the year with the way he handled the parental rights and education bill in Florida. He put himself and the company's square and the politicians crosshairs. And then you got this big back and forth with the whole special tax status and whatnot. So it's going to be interesting to see how he handles these types of situations in the future because you look at the company itself. I mean,

there's 165,000 employees there at Disney. You have to be careful jumping into these hot button political issues when a company actually takes a firm stance on what is honestly a debatable issue in many cases. That only creates division. And it puts the business in an untenable position. So Bob Eager, he is not, but he's going to have to figure out his identity as a CEO going forward because Disney is going to be in the spotlight for sure. Ron, we've already seen some M&A activity in the first half of the year in terms of the second half, fill in the blank. Don't be surprised if blank gets acquired. Netflix, Chris. They've stumbled. Things are not great at the moment. Subscriber

growth is going the wrong way. The stock is down from 700 to 180, but they still have over 220 million subscribers making it the biggest subscription video on-demand service in the world. That alone could make Netflix an attractive takeover candidate for some folks in this arena. I'm thinking Amazon. I'm thinking Apple. The gaming angle could also potentially be interesting. I'm thinking Microsoft or Sony. Even at current prices, still would be an $80 billion acquisition, so not for the faint of heart, but trading it only 16 times forward earnings. So it's not expensive. That's a big one. Jason, what about you? Yeah, that is a big one. One that I think is a lot of people have had fun kicking this around recently, DocuSign. Don't be surprised if DocuSign gets

acquired. There's a number of reasons why Dan Springer, the former CEO, recently agreed to step down, and it may not be related to potentially shopping the company around at all. But I could certainly see, given where the stock is today, in relation to the fundamentals of the business, a suitor, really taking a close look. Trude is still working its way to profitability, but it is cash flow positive. It's got a massive user base and a very user-friendly interface. So, what kinds of suitors might exist? I mean, you look at a competitor like Adobe, they could easily digest this, but with their own offering, I'm not sure they really need something like a docu sign.

You look at Microsoft, that would be a candidate, were it not for this Activision Blizzard deal that they're trying to push through. So the one thing that comes back to mind, Chris, it's Zoom. I think Zoom, this could be a total wildcard here, but Zoom wanted to make a deal earlier. They tried to buy 5-9 for around $15 billion, so they have the wherewithal to get this done. And it's something that they don't have currently. DocuSign can be very complementary to their overall offering and sort of the new way that we're doing business in many cases. And DocuSign management sees the opportunity to be a $5 billion revenue business over the course of the next several years if they execute,

which is essentially where Zoom is today. So I'm not saying it will happen, Chris, but I wouldn't be surprised if it does. All right, got just a couple minutes left. This is going to count as a stand-in for radar stocks, Ron. I think Blank is poised for upside the rest of this year. I like the hospitality sector right here. Consumers continue to move away from buying things like outdoor patio furniture and televisions, just as Target, and they're moving on to experiences such as travel. We're getting back out there. Yes, inflation will push back against this. We don't know if another COVID variant is around the corner, but I like that.

companies like Marriott, Airbnb here at this car in prices for the next several years. Jason? I think a little bit in line with Ron's hospitality angle there. Uber, to me, is a business that stands to benefit from a recovering economy. As things get better, people are traveling again. The world has opened back up. And the neat thing about Uber is they benefit from three key drivers and mobility delivery freight. And the cross-platform of nature of the business leads to lower customer acquisition costs and ultimately higher retention. attention over time, which is encouraging as well. And so you've got management there that continues to roll out new initiatives with things like high capacity vehicles, partnering with Avis to offer

Uber valet, person-to-person car rentals. I mean, it goes on. And they're even building out a little advertising driver of the business as well. So with a renewed focus now on cash flow and profitability and whittling down those costs to maximize efficiency, it feels like there's a pretty attractive risk-reward scenario setting up for Uber long-term. All right, drop us an email. Podcasts at Fool.com. That's Podcasts at Fool.com. We want to hear from you. What do you think is poised for upside in the rest of 2022? Jason Moser, Ron Gross. Guys, thanks so much for being here. Thank you, Chris. Coming up after the break, we are dipping into the Motley Fool Money Audio Vault for a conversation with bestselling author David Epstein.

We talk about Tiger Woods, predictors of success in the business world. Epstein's, memorable encounter with fellow bestselling author Malcolm Gladwell and why it might be time to dramatically scale back travel soccer here in America. I really think you're going to enjoy it. So stay right here. You're listening to Motley Fool Money. Here it is a groove slightly transformed. Just a bit of a break from a norm. Just a little something to break the monotony of all that hardcore dance that has gotten to be a little bit out of control. It's cool to dance, but what about a groove that soothes and Rooms, Romance, give me a soft, subtle mix.

And if it ain't broke, then don't try to fix it. And think of the summers of the past. Adjust the face and let the Alpine blast. Pop in my CD and let me run a rhyme and put your car on cruising. Welcome back to Motley Full Money. I'm Chris Hill. I hope you're enjoying the start of the Independence Day holiday weekend. And now our interview.

In 2019, I got the chance to talk with bestselling author David Epstein. He joined me on stage in front of a live audience at our annual Fool Fest investing conference. Epstein has master's degrees in journalism and environmental science. He's been a senior writer for Sports Illustrator, and he's the author of the New York Times bestseller, The Sports Gene, Inside the Science of Extraordinary Athletic Performance. On stage, we talked about his latest book, Range, Why Generalists Triumph in a specialized world. During our time, we discussed a wide range of topics including Tiger Woods, Roger Federer, and how to predict success in a business setting. But my first question for David was, where he got the idea for his new book?

The idea sort of still did grow out of the first book. So the first book was about the balance of nature and nurture and athleticism. And I was invited to the MIT Sloan Sports Analytics Conference, co-founded by the general manager of the Houston Rockets, to debate Malcolm Gladwell. It's 10,000 hours versus the sports gene. It's up on YouTube. I'd never met him before, and he's very clever, and I didn't want to get embarrassed.

So I tried to anticipate some of his arguments. I knew he'd have to argue. This was specifically about the development of athletes. I knew he'd have to argue for early specialization in sports and highly technical deliberate practice. So I said, okay, I'm the science writer at Sports Illustrated. Let's go look at what the science has to say. And it actually found in almost all sports, and most places in the world, athletes who go on to become elite actually have these so-called sampling periods where they play a variety of sports.

They gain these broad general skills that scaffold later learning. They learn about their interests and abilities, and they systematically delay specializing until later than their peers. We all know the Tiger Woods story of early specialization. That's like the most famous developmental model, but it's actually completely the exception. And golf is like an unusual sports skill compared to other ones. Whereas like with this, we all know, you know, when Mark Zuckerberg at 22 says young people are just smarter. We all hear that story. meanwhile the research shows that the typical age on the day of founding not when it becomes a blockbuster on the day of founding is 45 and a half but it's like we don't hear the stories that the science was really telling we just hear the tiger woods mark Zuckerberg stuff these much more it's very like daniel conman's availability heuristic the dramatic stories that we base our our models of the world on not what the actual science finds and you open the book with a great sports example because you know as you said everybody i'm not even a big golf fan and i know the tiger

Wood's story of just basically from the time he could walk. He's, you know, his father is drilling him on all these different things. And he's Tiger Woods. He's the dominant golfer of his time and maybe of all time. But the comparison you draw with Roger Federer, who is also the dominant tennis player of his age and probably on the short list of the greatest of all time, it's a completely different path. Yeah.

Roger was exposed to tennis early, but he was also doing swimming, skiing, wrestling, handball, basketball, badminton, rugby, tennis, of course, table tennis. I'm probably forgetting. Oh, soccer. That was his other biggest one, soccer. And his mother actually was a tennis coach, but she refused to coach him because he wouldn't return balls normally, like she couldn't get him to do the normal drills. So she declined.

When he got good enough to be pushed up a level with older players, he declined because he just like talking pro wrestling with his friends after practice. And when he finally got good enough to warrant an interview from a local paper, the reporter asked him if he ever became a pro. what would he buy with his hypothetical first paycheck? And he says a Mercedes. His mother's totally appalled. And asks the reporter if she can hear the interview tape.

And the reporter obliges. And it turns out Roger actually said, Mere CDs in Swiss German. He just wanted more CDs, not a Mercedes. And so then his mother was fine. So one of my colleagues, who was the senior tennis writer at Sports Illustrated, described Roger's parents as pulley, not pushy. So eventually he did specialize, but it was after what we know.

now know is the very typical developmental trajectory for most elite athletes. And golf, the people who study skill acquisition in sports kind of view golf as different, this sort of non-dynamic domain, where you don't need anticipatory skills, like to judge things that are happening quickly. And so early specialization may well work in golf. I don't know. There's kind of a dearth of science. I can believe that it does. But the problem is that we've extrapolated from that to all these other skills. We'll get into some of the business stuff from the book in a second, but I want to stick sports because it's and and I expose this ties into business as well because if you think about youth sports in America the business of it has almost gotten too big I mean the it's it's pretty

amazing that Roger Federer's parents were not only actively sort of pulling him away from specialization but also his mother was a tennis coach herself in the United States the you know the flip of that is she's the tennis coach and as soon as he can walk she's got him out there you know, sort of drilling. And not to pick on soccer, but it really does seem like soccer more than any sport in the United States, the youth sports business machine of that

is almost too big to overcome. No, do pick on soccer. Oh, okay. Because, so when I was living in, I don't live in Brooklyn anymore, but when I did, there was a U-7 travel soccer team that met near where I lived. And, like, I don't think anybody thinks

that six-year-olds have to travel to find good enough competition in a city of nine million people. So, no, really, so I don't think that has anything to do with optimal development for those kids. Because we know the way to make the best 10-year-old soccer player is not the same as the way to develop best 20-year-old soccer player. But those kids are customers, right? And someone else has an interest in keeping them away from those other sports. When you talk to elite athletes, they're the ones who know, and they're like the most against, because they know what they did against specialization.

But that's a whole other sort of industry. But some places like France, which just won the World Cup. started decades ago reforming its pipeline, where they get kids exposed early, and they get them in the pipeline early. But then they, because I think multiple sports is really just a proxy for diversity of movement and training. Because there's this classic research finding,

breadth of training predicts breadth of transfer. This means the broader your training scenarios, the more likely you'll be able to apply your skills to situations you've never seen before. And so they get the kids exposed early, but then they put them in these games where they're playing, like on sand one day, and cobblestones another day. This game called Futsall, where they're in small spaces.

And they, the code. aren't even allowed to talk most of the time. They're just saying there's no remote control, meaning the coaches shouldn't try to micromanage the players. So they get them exposed early, but they put them in this very free-form sort of kind of development that we know is the best. So I think there's hope, because there are models

for making this better. Business is sort of one of the through lines of this book, because we just talked about youth sports, but one of the things that comes up is sort of the business implications on scientific research. I was saying, you know, before we started, one of the more jarring things to me in the book is how scientific funding has increased over the last, say, 30 years or so.

But discovery has actually dropped because it seems like the pressure for economic outcomes immediately or in the short term are taking precedent over just discovery. Yeah, and I think everyone knows we want those outcomes. The end goal is applications. The question is how best to get there. And to that point, I was reading a lot of Nobel acceptance speeches when I was doing the research. And it's funny thing in the more recent years you start to notice, almost every year someone's in their speech says, well, I wouldn't be able to do my work today because I didn't really know what I was going to find. I just had this interesting question.

And now in your grant applications, you have to say, here will be my application. And that's okay. but we have, you know, a venture, a VC community for that that can be sort of more focused on that. And so why, like, squash the diversity of the research endeavor? Because so many of the biggest breakthroughs have come from questions that someone was interested in that we didn't know where it was leading. Like Venovar Bush, who, you know, led the scientific research efforts during World War II,

wrote a report for the president about a successful research culture. And you see these phrases that are like, the free play of free intellects working on questions of their own design. And that led to like 30 years of wildly successful progress that led to microwaves and MRIs and the Internet and all these other things. And so we have to keep in mind that we know the process is inefficient when we don't exactly know what we're looking for. So it's a problem that we're having a sort of purifying selection where we're forcing

people to say the applications before they really know what they're going to find. One of the things I like about your book is we just meet all these people. You know, put aside Tiger Woods and Rogers Federer. In your research, all of these people, you just touched on something from one of my favorite people in the book, Arturo Casadoeval, who's the science, who talks, speaks to that and talks about the very nature of, you know, sort of pushing boundaries is that you're out there, you're probing, you're not really sure what you're going to find. it's an inefficient process. Yeah, Arturo is one of the most prominent immunologists in the world. So if specialization continues, he wins no matter what happens, basically. He has no problem getting funding, but he decided to leave sort of a cushy post in New York

to go to Johns Hopkins School of Public Health because they were allowing him to start a new education program where he's essentially trying to despecialize the training of future scientists because he's saying, look, he arrived and showed this graph where he said, the rate of retractions of science, the acceleration is now outpacing the rate of new publication, so we continue this trend, we will have retracted all of science in a couple years. And so sort of science gallows humor, right?

But there is this retraction problem now. We're recognizing there's been a lot of bad work. And by the way, I contributed to that bad work. So I have a master's degree in science, and only as an investigative reporter writing about how science worked, did I realize that I, too, committed statistical malpractice of the variety he's talking about because I was rushed into, not purposely,

I was rushed into very didactic specialized material about Arctic plant physiology before I knew how my statistical tools worked. And you can get these big databases, hit a button to run this incredibly complicated statistics. Statistically significant, master's degree. And this research is still published. And it's crazy that only later did I learn how scientific thinking is supposed to work. And so we're having this problem. So he's trying to despecialize the research and get people to sort of think more broadly.

He described science as becoming a system of parallel. trenches, where everyone's in their own trench and not standing up to look over the next trench, even though that's often where their solution is. And there's all these perverse effects. Like, women are much more likely to write grants for interdisciplinary proposals, but interdisciplinary proposals are systematically marched down because they always go to one discipline or the other. And so they're about less likely to get funded.

So we're kind of like, but the world is interdisciplinary. Disciplines are a necessary evil for breaking down how we study. And so we're docking people who are asking questions. about how the world really is. Well, and one of the things you get at is, you know, sort of, and Arturo does it with science. We've seen it, you know, in the military where basically leaders are trying to figure out what's the best way to mentor people, what's the best way to educate people,

and along the way they find out, oh, we've been doing it wrong. We've absolutely, not only have we achieved short-term success in education, We've deluded ourselves in thinking, well, pat ourselves on the back, everything's fine, and in fact, we've set those people back. Yeah, yeah, that gets to some themes in the book, so they can jump into that one in a couple of places. But one of the themes to me was that there are things you can do that cause the most rapid immediate progress that systematically undermine long-term development.

So I'm going to use that cue to get into one of the studies that was the most surprising to me in the book, which was done to the U.S. Air Force Academy, that you could never set up. They have this amazing scenario where they bring in their freshman class, whatever, 1,000 students or whatever it is. And they have to all take a sequence of three math courses, start calculus one, calculus two, and then a follow-on course. And they are randomized to professors for calculus one,

and they are randomized to the next course, and then re-randomized again to the next course. So you can really see the impact of teaching, and that's what these researchers wanted to see. And what they found was that the teachers who were the best at promoting contemporaneous overachievement compared to the characteristics that the students came in with in calculus one, those students then systematically

underperformed in the follow-on courses. So the teacher whose students performed sixth best out of 100 in his calculus one, got the seventh best ratings because the kids feel like they're learning, they rate them higher, was dead last in how his students then did in the follow-on courses. And it turned out that professors whose students did the best contemporaneously were teaching a very narrow, curriculum and their students were learning so-called using procedures knowledge that they could

execute when the test came. But when you get into a different class and you're facing different stuff, breadth of training predicts breadth of transfer. You don't have those broader conceptual models. And so you don't have what's called making connections knowledge, which is the broader frames where you learn how to match a strategy to a type of problem instead of just executing procedures. So it's really deceptive, right?

Because the learners rate their learning is faster. They rate the professors as better. They do better. and then in the long run, they're undermined, which is deeply counterintuitive to me. Coming up, David Epstein talks birds, frogs, and LinkedIn. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Chris Hill. This week, we're revisiting my conversation in front of a live audience with best-selling author David Epstein

about his latest book, Range, Why Generalist Triumph in a specialized world. So in terms of business and leadership and one of the things I think you touched on in the book was had to do with maybe using LinkedIn to figure out how do people get promoted. It really does seem like the people who have

the widest breadth of experience they're the ones most likely to move on. Yeah and I should say we absolutely need specialists. I don't want to denigrate specialists. I like Freeman Dyson, the mathematician and physicist and writers, framing of it where he said, we need frogs and birds. The frogs are down in the mud looking at all the little details. The birds are up above.

They don't see those details, but they can integrate the work of the frogs. And he said, we need both for a healthy ecosystem. The problem is we're telling everyone to be frogs, and we're not telling anyone to be birds. And the LinkedIn research you're referring to where they were looking at, they looked at about a half million members because they have these amazing database. What are the best predictors of someone who goes on to become an executive? and one of the best predictors was the number of different job functions that an individual has worked across in their industry. And their chief economist thinks that's because they get this much more holistic view of the industry.

Each additional job function saved them about three years of experience in moving toward the C-suite. And that kind of resonated with me because I sort of saw that as I was visiting different companies. I know it's only been out for a week or so, but I'm curious, what's been the reaction that you've gotten from, not necessarily from, readers who I'm sure are enjoying the book, but to the extent that you've heard from communities or leaders, whether it's an industry or youth sports or something else. Yeah, more positive than I expected, and maybe that's because the blowback part takes a little longer. But this book got out of the gate faster than my last one did, and the last one, there was a lot

of pushback about the 10,000-hour rule stuff. Helpfully this time, Malcolm Gladwell and I were recently at a conference in March, the same when we first did the debate, and this is on YouTube, and at a minute 54, he says, I now believe I conflated two ideas, the idea that it takes a lot of practice to get good at something with the idea that in order to become good at X, you should do only X, and only X, starting as early as possible. And I thought that was like a very astute thing for him to say, and I think that might have softened some of the blow a little bit for me. But it really has been interesting to hear people identify with it and some of the executives. So I started getting invited to some business things, and the executives would tell me, like, this really resonates.

and some of, okay, and one, so I just met a woman who was the head of executive search for a really big company, and she, this really resonated with her, and she was telling me, I think in the age of LinkedIn, for all its good things, we are getting too narrow in describing our job functions. Because if you look at research on serial innovators, for example, this woman Abby Griffin, whose research is in range, she says to HR people, like, you have to keep it broad, because the serial innovators, they often zigzag, they've had other domain experience, they have a wide range of interest, tend to have hobbies. They read a lot. They need to communicate with people outside their domain. And when you define the job too narrowly, you accidentally screen them out. And so some of the people who do sort of executive search, apparently that's resonated with them because they've

sort of reached out to me and said, we are increasingly making this square hole and we have the square peg we want to fit it. But those aren't necessarily actually the people who are set up to make the biggest contributions. I've actually experienced that on LinkedIn because I hosts a radio show and a podcast, and that's what I list on LinkedIn. And once a month, I get an email from LinkedIn, and it's, here's some jobs you might be interested in, and all of them are host jobs, but it's like at a restaurant. Like, maybe I need to do a better job of getting across what I actually do, because... Well, that would be a transfer of skill.

It would be a trinkess. You know what? I'm too specialized. I should branch out and do that sort of thing. The book is Range, Why Generalist Triumph in a specialized world. You can find it wherever you find books. And unlike when I interviewed David Epstein in 2019, now it's available in paperback. You get to save a couple of bucks.

If you're just starting out or you know someone who's just looking to get started investing, we have a free investing starter kit. It covers everything from saving money to 401K plans to how to buy your first stock. It comes with a built-in watch list of 15 stocks and five ETFs that were selected by our investing team. It's free. Just go to fool.com slash starter kit. That's fool.com slash starter kit. Check it out when you get a chance. On behalf of everyone at the Motley Fool, I hope you have a safe and fun Independence Day weekend. And please be safe with the fireworks. Okay, don't be one of those people who ends up trending on social media because it did something

really stupid with fireworks and ended up in the emergency room. And look out for your friends, too. You know who I'm talking about. That one friend? Yeah, that guy. Keep an eye on him. That's going to do it for this week's Motley Full Money radio show. The show is mixed by Dan Boyd. I'm Chris Hill. Thanks for listening. We'll see you next time.