Motley Fool Money - Motley Fool Money: 10.14.2011

Episode Date: October 14, 2011

Google reports big earnings.  Hulu says it's not for sale.  And a hedge fund manager gets an 11-year prison sentence for insider trading.   Our analysts discuss those stories and share some stocks on their radar.  Plus, best-selling business author Jim Collins talks about his new book, Great by Choice:  Uncertainty, Chaos, and Luck -- Why Some Thrive Despite Them All. Learn more about your ad choices. Visit megaphone.fm/adchoices

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app, 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. The best thing in life are free, but you can get them to the pond. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. Thanks for being here. I'm your host, Chris Hill, and joining me in studio this week from Motley Full Hidden Gem, Seth Jason, from Motley Fool income investor James Early, and for a million-dollar portfolio, Ron Gross.

Guys, good to see you. Hey, Chris. We have got retail numbers, earnings reports, and abilities. Billionaire going to the big house. We've got best-selling author Jim Collins talking about what enables companies to thrive during chaos, and we've got a few stocks on our radar. But we begin with the big macro. A lot of headlines at the end of the week, guys. Tim Geithner said on Friday that the IMF has substantial resources to help with Europe's debt crisis. Retail sales in September were up 1.1%. That's the fastest growth in seven months. And U.S. consumer sentiment fell in the latest survey with consumer expectations. falling to their lowest level in 30 years. There's a lot there. Ron Gross, I'll start with you. What's your headline of the week? Chris, I like the good old days when we could just ignore the economy and look at companies, and especially the European economy. We have to bring in Slovakia now into our analysis. We have so many systemic problems here. It's hard really

to know what kind of long-term implications these are going to have, and we have such volatility in the stock market on a daily basis, up 2%, down 2%. It's really hard to cut out the noise, but I think it's really crucial to do so and get back to looking at companies and how they generate cash flow and kind of let the economy take care of itself. I think the challenge, though, is that stock correlations are now higher than ever, at least higher than any time in recent history, which is kind of the opposite of a stock pickers market in a way it emphasizes the macro stuff. Now, it won't be that way forever. My question about the IMF money, though, is that IMF money comes with a lot of strings attached. IMF austerity, people often say they really impose strict conditions. So the question is, will Europe be willing to take this money? They need it, but I don't know that they want to take the hard part of the medicine to go along with it. Yeah, and does the IMF just have money sitting

around in a room? Because that's kind of the way Tim got there. Sure, it's called promises from America and China, right? Apparently. Seth, what was your headline of the week? Well, if we want to look at that retail sales information to get a bright side of the story, there was also a revision upward of the August numbers, and these numbers aren't really terrible. They're pretty decent. They beat expectations. Not terrible. Right already. Not terrible is the new good? Yeah, well. I'm going to tell my wife, she's not really terrible. Yeah, some are pretty good, actually. Grocery stores up 6% year over year. Clothing and accessory stores, 7.6% year over year. Non-store retailers, same story we've told before, your Amazon's, etc., up 10.1% for the year. that's some decent news.

And it's always funny to me when consumer sentiment reaches one of those low marks, but people are going out and spending more than they were the month before or the year before. Yeah, I think that's the confusing things for investors. What do you make of that? How can consumers be really worried, but yet they're going out and spending? Incomes are down. Unemployment is high, but they're still spending. Do people spend as therapy perhaps?

And it's not all high-end. A lot of it we've talked about in here is high-end stores seem to be doing better than the loan. end stores, but when you look at these numbers, it's not all high end. It's, there's some strength across the board here. So let's put one in the wind column. Sticking, oh, go ahead. I did work for a guy when I was young. He used to get stressed, and I hear him say, oh my God, I have got to get to the mall. That was his, that was his release. Retail therapy. Well, in this case, cars, clothing, and fuel were really strong, and so, you know, the necessities of life. I don't know how many people were flak in a Best Buy in this particular case.

Well, I was ignoring actually the gasoline, Stephanie, which is why. I went to the gasoline, when gasoline prices are much higher as they are now higher than they were last year, that also pumps this number up. So you need to look at the line items that strip out the gasoline and the car stuff. Sticking with retail, Gap announced it is planning to close nearly 200 stores in North America by the end of 2013, and it will expand in China. Seth, what do you make of this? Did the Chinese like boring clothes more than we do or something?

I guess that's what Gap is betting on. You know, the joke I have had about Gap for a long time is that you don't, somebody asks you, what was Gap trading at? You just say any number between 17 and 21 or so, and you're probably right. It's been that way for years and years and years. And they're finally getting, they're trying to cut their way to higher profitability, so you get rid of some of those Gap stores. Keep in mind, this is a company that with Old Navy and Banana Republic and everything worldwide has something like more than three, thousand, two hundred stores.

And who's really just dying to get out there to gap? In this economy, we spend some money at Old Navy because you get clothes that are of about gap quality, you know, for the baby, mostly we go, although I'm wearing some old Navy pants a day. But they're cheaper, and people who want higher end clothes go somewhere else, maybe not necessarily banana republic. So I think the gap is just sort of that particular concept is on a long-term downtrend, and there's probably more cutting to come.

James? Gap has long been the general motors of the American clothing scene. Both these companies just could not make products that people want to buy. And Tom Peters's management guru who was in here the other day, and he really, I think, hit the nail in the head. Big companies tend to have this problem with being established, and Gap just simply hasn't taken the risks with its fashion for years. And they've taken little minor tweaks, and it just hasn't worked. Ron? I think there are just too many retail stores in general, and the Gap is probably the most guilty of this,

They're in every mall. And they don't stand for anything from a fashion perspective. They don't differentiate themselves in any way. And there's only so many middle-aged guys like me who like boring clothes. And so they can't really get it done being so ubiquitous. They've got to pair it back. You're listening to Motley Full Money. We're here every week.

But for daily analysis on the latest money news, check out our daily podcast. Marketfulery. It's on iTunes and at Marketfulery.com. It is also one of the finalists for the 2011 podcast award. So if you want to vote, vote. If you want to go to podcast awards.com, cast your vote. Another blog quarter for Google with revenue up 33%. Ron?

Yeah, getting it done. How do the numbers look? Yeah, we own Google in a million-dollar portfolio, and it's up nicely today on the news. Numbers look really good. Online advertising seems very strong. Paid clicks are up 28%. It's interesting, in contrast to more traditional advertising, say, for example, Disney's ESPN, who had flat ad revenue for the latest quarter.

It really seems like companies are willing to spend online, and Google being the big daddy of the mall is really getting to be the beneficiary of those spending dollars. Is there any weakness in that business? Not surprisingly, Western Europe was actually weak, but emerging markets and other international areas actually offset that. And they're spending quite a bit. Obviously, they hired thousands of people recently to help support that growth, so costs are going up.

its costs that are necessary to support the growth. What's going on with Google Plus, their attempt to essentially take out Facebook? 40 million users up from 10 million just a little while ago. Now it was in its infancy then, so you would expect to see rapid growth, unless, of course, it's a big dud. But it's so far so good. It seems to be really taking hold. Are you on Google Plus yourself? I am not.

I find Google Plus to be pretty amusing because when you go to, say, the Wall Street Journal or another news website, and you've got the tweet button and the Facebook like button, and then the Google Plus recommendation button, and it shows how many people have taken that action with that article. There'll be a couple hundred tweets. There'll be several thousand Facebook likes, and then the Google Plus button will have a single-digit number in front of it. Okay, so maybe that's where you.

I think most of those 40 million people are there to see what's going on, and then they go back to Facebook. Mattel's quarterly profits were up nearly 6%. thanks in part to strong sales of Barbie. James, shares in Mattel actually dropped after this report came out. What's going on? Chris, the revenue is good. Six percent U.S. growth.

13 percent international growth. Barbie, like you said, American girl. But companies don't live on revenue alone. Profit is really what matters. And unlike Hasbro, Hasbro does a lot of licensing of movie characters where kind of the advertising is a little bit more baked in. Mattel spent, I forgot how much more, like 9 percent more on advertising. their gross margin was down because of that. Basically, higher advertising costs deflated the lower sales too much for the market.

As the father of daughters, I find it interesting that Mattel essentially breaks up their girl category, their girl toy category into two groups. There's Barbie, and then everything else comes under the umbrella, other girls. So things like Disney princesses, Monster High, all of that comes in the other girls. James, I know that Hasbro has kind of some exposure to the movie business, because they do a lot of licensing for some of their characters there. Transformers. Yes, yes. Does Mattel get into that business? They do. They have a couple of movie properties, but it's, I don't know, all the top of my head, but it's a minority of their earnings, whereas Hasbro, I think it's like half or more.

So more opportunity, but more risk from the Hasbro perspective. It's a lot cheaper, though, to develop your own brands, but you just have to advertise them more. Hasbro also has the My Little Pony line. So, Seth, I don't know if your daughter has been exposed to the whole My Little Pony thing at all. No, I plan to teach her that horses are a food animal, actually. Nice. So it's safe to say, if you're on a desert island and you have to choose either like a my little pony or a Barbie, you're going with a Barbie. I'm thinking Mr. Coconut is a much better choice. Our equestrian friends should send their email to Seth.

I can replace Mr. Coconut if he disappears. Coming up, the online video landscape changes once again as Hulu decides to take itself off the market. Stay right here. This is Motley Full Money. Welcome back 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. I'm Chris Hill, here in studio with Seth Jason, James Early, and Ron Gross. Guys, the Occupy Wall Street movement is closing in on its one-month anniversary, and there are no signs of it slowing down. On Friday, New York City officials postponed a clearing of the park where protesters had been camping out.

Ron? Yes, sir. The state of the protests. You know, I'm empathetic to a certain extent because there's obviously people not just in this country, but now it's spreading overseas that are very, very unhappy. And they have good reason to be in many different cases. However, if it's going to be an effective movement, at some point, we've got to get down to brass tax and come up with what we stand for. And as Bill Clinton... You're already identified yourself.

They stand for. I heard a we, Ron. And as Bill Clinton said on the Letterman show last night, you need to be for something, not just against something. things. So they need to, I've heard some interesting ideas. You know, there's obviously things about education and money in politics and even war and environment. They're kind of all over the place. Eventually they need to focus. And I'm not sure they're going to be around long enough to get to that focus phase. James? And that's the problem because the same vagueness, the all inclusiveness that made this such a good catch-all for anybody who has any type of grievance about

anything is going to be, I think, unfortunately, the undoing because they might all agree about what they don't want, but they don't share a common vision of the future. You have socialists, you have libertarians altogether, which is kind of cool, but it's not going to go anywhere. Seth? I'm really sympathetic because I think that there are major problems with the way, especially things like executive compensation go or the fake capitalism we have in the U.S. where taxpayers support these huge enterprises. And then when the winnings are good, they're split up among a few people who are members of an elite club. And when things go badly than the rest of us pay, that does need to change. Unfortunately, like James

and Ron said, unless you sort of really focus on those goals, not much is going to happen. And I'm hoping we can use this moment. We squandered the problem, or Obama, the administration, squandered the problem, did not get some of these structural problems taken care of. And maybe if this effort, if this protest survives, we can go back and get some of these changes made. On Thursday, hedge fund billionaire Raj. Roger Rotnam was sentenced to 11 years in prison for insider trading. James, it is the longest sentence ever for insider trading. What do you think? Well, Chris, the irony here is that Roger Rotman used to apparently have these parties where people could go and watch these naked women in the shower. And now let's see other people who are going to be watching Raj in the shower. That is my party. Insider trading is notoriously hard to prosecute. So I am glad that this finally got done. I think this is a fair sentence, and it does send a good message.

Remember back in July, guys, when Disney CEO Bob Eiger said that he and the other owners of Hulu were committed to selling it? Well, on Friday, Hulu's owners said that the online video service is no longer for sale. Seth, Jason, we had Google, Yahoo, Dish Network, all reportedly kicking the tires of this thing. What happened? Well, we don't know for sure. It's a lot of he said, she said, so we rely on these reports from. from people familiar with the thinking of executives. It's not even people familiar with the process.

It's people familiar with their thinking. But a lot of what I've seen does make some sense. And one of the things is that this, with Netflix down, the executives who run Hulu, who own Hulu, these various organizations, have decided that maybe Hulu is in a position now to shape the future of online video,

a more powerful position. And that would make sense that they hold on to it. The other problem is they probably didn't get the money they wanted. And also, So apparently the bidders were seeking content deals that were a little bit longer, a little bit more exclusive than they wanted to give. And that is an interesting point, I think, regarding if you think about what's going on with Netflix, this all suggests to me that prices for content, especially content exclusivity, are going to continue to rise, which is a real problem for Netflix. Also, earlier in the week, we had Netflix coming out on Monday and announcing that they've essentially changed their mind. They're going to drop the whole quickster named. Ron, you were a big

fan of the Quixir name. Lie! No, that was definitely a major stumble, smart of them to reverse it. Poor execution that they did it in the first place. But, hey, if you make a mistake, the best thing to do is correct it. But, you know, the street will only give you one or two mistakes before they start to sell off your stock, and that's what we're saying. And when this happened, the day this happened, the stock went up, and then it started to fall back. And I don't normally like to try and interpret the movements, intraday movements, but I'm going to do it in this case. I think the street said, hooray, they realized it was a mistake, and then said, wait a minute, they should have understood this beforehand. Maybe they don't actually know what their business is.

In the few minutes we have remaining, we're going to go with the stocks on our radar. And Ron Gross, you're up first. Okay. I've been looking recently at Pebblebrook Hotel Trust, ticker symbol P.E.B. They are a real estate investment trust. Currently owned 20 hotels. They're picking hotels up on the cheap because right now that industry is kind of out of favor. And I think they have a nice long runway and plenty of hotels to acquire in the future. James? Chris, I'm looking at the Chemical and Mining Company of Chile. It's a stock advisor pick. It actually has some long Spanish name, but I'm just going with the American translation. It's highly variable, not super, it's variable for dividend stock, 1.4% yield. Well, that's low for you, is it?

It's very low for me, yeah, but it's more of a capital appreciation thing. I'm just looking at it. It's on my radar. I'm not endorsing it per se at this point, but it owns the only commercially viable source of natural nitrate. It produces for fertilizer, has lithium for car batteries. It owns a bunch of land in this Chilean desert. And the ticker symbol? SQM.

Seth? Winnebago, WGO, is one of the first company. companies in the Hidden Gems universe to report earnings lately. And this was this week, and they didn't look so bad. As you can imagine, things aren't going great because large RVs are big-ticket items. This is a tough economy. But they were better than expected. The company has a strong balance sheet, has some of the most recognizable name brands in the business, leads in certain categories. And if you are a patient investor, I think Winnebago at these prices is a decent idea. James, you strike me of the four of us as the most likely.

to go for actually buying a little bit more. I was going to say, I don't think I've ever told you guys about my RV fantasy, but I would love to buy one of these huge Winnebagoes and just drive around with one of those mobile internet things in the top and just live for like a month in all these different places. Well, you should do that, James. I pitched the idea to my wife and she's not a fan, so it's kind of dead in the water. So if you're out there and you want to marry James, what we're saying, drop us an email, radio.

And if you have one of those really nice ones, you have one of those $500,000 Winnebagoes, too. We've got one minute left. Seth, something you're working on for the next week? It's going to be earnings, earnings, earnings for the next few weeks. James? Putting our next issue out and in a video maybe about some kind of a counting shenanigan. All right, and we'll see if anyone emails us, Radio at full.com, maybe we'll get you that RV ride you're looking for. Ron, what do you got? Gearing up for the November 1st, MDP reopen.

Only one time a year do we reopen to new members. For more info, go to MDP.Fool.com. And would you buy-seller hold us actually getting an email from someone with an invite for James on the RV? If the over-under is one, I'm going to say you, bye. All right. Email address. Once again, Radio at fool.com. Ron Gross, James Early.

Seth Jason. Guys, thanks for being here. Thank you, Chris. Coming up, a conversation with best-selling author, Jim Collins, on how great companies thrive in uncertain times. Until the day, I've retired about a 32-foot RV. And it was 12 feet high with two cars wide and taxi, floppy lake. And to say it at least that roadhog feast would drive. It took a 40 acre field just to turn it around in miles per gallon.

We got three. This is Motley Full Money. Welcome back to Motley Full Money. I'm Chris Hill. Jim Collins is the best-selling author of six books that have sold more than 10 million copies worldwide, including classics like Built to Last and Good to Great. His latest book is Great by Choice, Uncertainty, Chaos and Luck, Why Some Thrive Despite Them All. Jim, thanks for being here.

That's great to be with you, folks. So in the book, you look at a group of companies over the time period from 1972 to 2002, but you really begin the book in 1911, where two teams are racing to be the first together. get to the South Pole, one team makes it and returns safely. The other team, it's just disaster striking. It's 34 days later that they make it, and they all end up dying. Yeah. So a hundred years ago, in 1911, two teams, they did. They were heading out to the South Pole. They were trying to be the first humans in history. So they were trying to do something great, right? It's not a matter of just surviving. They were both trying to do something great. And they were doing it

an environment that was very unforgiving and uncertain. No one had ever been there before. She don't know what is out there when you get to the South Pole. And they left for the pole within days of each other, and you're correct. Roald Amundsen, the Norwegian team, got there 34 days before the British team, and Amundsen made it back on the precise day that he had penned in his planning journals when he was in Norway. And the other team, Robert Falcons, Scott's team, all members of the party died 11 miles from a supply depot on the way back. And so what we found in our research is very interesting is we'd finished our research. And we were already crystallizing all of the findings from the research.

And I was out rock climbing one day with a good friend of my name, Chris Archer. And we were roping up below this climb. And he said, by the way, so you're done with the research. What have you found? And so I started talking about how these leaders were different. And what was interesting about them? What was different about Herb Keller, and Andy Grove and George Rathman, and what these folks were like? And he says, wow, they sound just like Roll Momminson.

And I said, who? And he said, Roll Momminson, the guy who first went to the South Pole, and that's what he was like and how he was really different than Scott. We decided then to use the Amundsen and Scott's story, because in our research, we're always looking at pairs of companies. You've got Southwest Airlines and Pacific Southwest Airlines. You have a company like Striker and USSC, and they're both heading out into these uncertain territories, but one gets to the South Pole and back, and the other doesn't.

I want to go back to Abinson and Scott for a minute. I mean, going to the leadership behaviors, what were the specific behaviors that separated those two guys? Well, this is where that triad of behavior, the fanatic discipline, empirical creativity, and productive paranoia, all really show up. So in the case of, let me just briefly kind of highlight each of them because they're fascinating in this particular pair. So if you take the fanatic discipline, it turns out that Amundsen actually had a very clear 20-mile march. What means to 20-mile march is that you hold back

in good days, but you always do your best to achieve your march in difficult time so that you continue to make consistent progress. And Scott would do these really really, big days and then rest when the weather conditions seemed not quite as good. Amundsen on the bad days would say it's been a terrible day, but we have advanced 15 miles closer to our goal or whatever it happens to be. He would move along like clockwork. But when he was 45 miles from the pole and he didn't know where Scott was, Scott's coming in from a different angle, he could make it in one push. But Amundsen understands that it's a true productive paranoid, if we go in one push to the pole, and we go 45 miles in a day, and then

we end up depleted and exhausted, and then an uncertain and unpredictable storm rises up, you know, we could die out here. So he had the discipline when they were 45 miles from the pole, and they don't know where Scott is, and they don't know if they're going to win, to only go 17 miles that day. And it's just like Southwest Airlines when they had 100 cities clamoring for their business in 1996 and they only opened four cities. Because if we over-extend and then there's a storm and we knew five years later there was a storm, we could be in serious trouble. That same philosophy showed up in Amundsen, Scott. Now you go down to the empirical side. Amundsen did not, his empirical creativity, he did not try to outsmart or out-innovate

the South Pole. He had this stroke of humility where he said, the first thing is I have to really figure out what's going to actually work. Not what I hope will work, not what I'm going to bet my life will work, but I haven't really tested. I have to really, we're betting our lives out here, it's got to be on what we'll actually work.

So what he did was he went and lived with Eskimos and learned from the Eskimos. Tell me what you've learned from hundreds of years of being in this environment. What actually works. And they taught them about dogs and they taught them about sleds and they taught them about the right kinds of clothing.

And, of course, what Scott did, And one interesting thing is Scott bet on a disruptive technology. He bet on motor sledges, which were this big invention for the time to bring motor sledges to the South Pole. But they weren't empirically tested enough, so it was creative, but it wasn't empirically validated. And so the motor sledges broke down in those harsh conditions, leaving Scott to have to use ponies, which then didn't make it, which then left him with having to shoulder straps across their shoulders as men, and to literally drive. drag their sleds behind them of a distance roughly equal to New York, to Chicago, and back. Amundsen said first go with what's empirically proven and then that big.

Scott went with something that wasn't empirically proven and left himself exposed. And finally, on the productive paranoia side, one of the things we know about our companies is they understand that the way you achieve great things is you've got to stay alive. Right? But the only mistakes you learn from are the ones you survive. And in an uncertain world full of a lot of disruptive forces, rule number one is don't hit the death line. I mean, you've got to come back alive so that you can come back on another day and another day and another day.

And so if you look at Amundsen, he was always building buffers, so he would put three times the amount of resources he needed in his supply depots so that he would have extra buffers. He would put markers on either side of his supply depots for up to 10 kilometers, giving himself a 10K target to hit in case he got a little bit off course. How's that apply to companies? Well, our companies carried three to ten times the amount of cash to assets that most companies would carry. Why? Because someday you might need them. And if you don't have them when a great opportunity comes or you don't have them when a major meltdown comes, you're going to be exposed. And that is exactly how our folks led.

Let's dig into some of those companies that you mentioned, because again, you know, the book really focuses on companies that are starting out, in many cases, from a point of vulnerability. Yep. And have not just a rise to greatness, but a staggeringly huge rise to greatness. The 10xers, as you call them. A company like Intel, why was Intel? able to succeed over this 30-year time period in a way that its competitors just couldn't? So personally, just very briefly underscore something you just said. We started with 20,400 companies at the start of our search to look for a small set of

companies that met three tests. One is they had to be vulnerable at the start, so they were small little startups at the beginning or small little companies at the beginning, Intel with three employees, Southwest with three aircraft, right? And then second, they had to then go on to become giant winners from there. And the minimum is they beat their industry indices by 10 times. They didn't win by a little, 10 times or better. And then finally, they had to do it in a world that was characterized by this high degree of uncertainty and stability and big forces out of their control. Now, you take a look at Intel, right? Vulnerable little company went on to become the big winner in the

semiconductor industry and did it in an industry that has all those characteristics. What was Intel able to do? So what we find, and this was Amundsen Scott, this was in all of our study companies, is that the leaders brought a set of behaviors that they instilled in the company. Those distinctive behaviors were a fanatic discipline, an empirical creativity, and a productive paranoia. And then out of that, they got a much higher return on luck. If you take a look at, say, Intel, everybody would think fanatic discipline, fanatic discipline, fanatic discipline, what would that mean? Well, in Intel's case, they had what we eventually came to call in the book, a thing called the 20-mile march, right? Every company had a 20-mile march, just as Amundsen would march 15 to 20 miles a day on his way to the South Pole. Never going too far, never not going far enough. Always just right, 20 miles, 20 miles, 20 miles, 20 miles, what's your 20-mile march? Well, Intel, from its very get-go had a 20- mile march, and that was Moore's law. No matter whether it's good years or bad years, whether it's an industry meltdown or boom times, whether there are severe competitors or whether

it happens to be a time where we own the market. No matter what, we are going to double the number of components at affordable cost on a semiconductor chip every 12 to 18 months like clockwork. Coming up more with Jim Collins as we dig into the future of Apple. This is Motley Cool Money. You're listening to Motley Full Money talking with Jim Collins. His new book is great by choice in the wake of Steve Jobs' death and all of the articles that have been written about him over the past week. Certainly, and rightly so, his innovation and creativity is cited. But one of the things that you touch on in this book is the discipline of Steve Jobs when he returns to Apple in the mid-1990s. Yes. We can talk a lot about Steve Jobs, and I have it's a lot. emotional for me because of some wonderful things he had done for me early in my development. And I owe a debt to him in many ways. As I looked at the resurgence of Apple, though, and then the trajectory of Steve Jobs, it's very interesting because you would think that he came back

into Apple in 97, and the first thing he did was to go in and do breakthrough innovations. And of course, Eventually, Apple, of course, did some pretty remarkable innovations. I'm sitting here with my iPad, which I just dearly love. It's on my table right here. But the first thing he did was to return Apple to being a very disciplined organization. They got their balance sheet back in order. He started getting their supply chain in order. He had brought in a great disciplined leader in Mr. Cook who joined him.

They were sort of like Yin and they were Yang. And then went back to saying, we need to get back to making the Macintosh, work. He didn't launch off and do big new things until he made sure he got the Macintosh back in order. All of this was in place, and it wasn't until a few years after that that they fired a small bullet on a thing called the iPod, but it wasn't really the iPod at the time, and they were even behind, right? The MP3s had already happened. And it was a series of very disciplined steps of firing bullets, making one for themselves, making some file sharing for their own Macintoshes. They can use them inside their own software that would work on the Mac, and then they found that more

people liked it and so forth. And it wasn't until they'd really validated the idea in a very empirical way that they went big and put it on Windows, and that was the Cannonball. So when you look at it, you see this very disciplined process that's married to the creativity. We write in the book, and Steve Jobs is a great example of this. It's not just about being creative. it's about marrying discipline to creativity in such a way that the discipline amplifies the creativity rather than destroying it. That is that story. Now, there's one other part of the story.

I'd always looked at Steve Jobs as an industrial Beethoven. People would say, well, what do you think of them as a Fortune magazine once asked how do you evaluate him as a company builder? And I said, you know, it would be like asking how do you evaluate Beethoven as a company builder? And these great products were like symphonies. And we had yet to see the ninth. But as the years went by, I came to really appreciate something, which is that he used to be the person who focused just on building insanely great products

and writing the great symphony, like a Picasso or something. I think he grew into a company builder. And he went from just insanely great products to how do we now build an insanely great company. I think that's an amazing journey. Because if you think about it, you tend to think that somebody who's so much the product person, so much the creative person, can't make that journey. He did make that journey. He grew. And that, to me, is the inspiring story, is how much he himself grew.

What do you think the post-Steve Jobs future is like for our? couple. Again, I don't tend to predict things. What I would say is this. He made the shift to really focusing on building a company. And here's, look at Disney today. Walt Disney was one of the great creators, and Walt Disney today is a great company. And look at Walmart. Sam Walton was one of the great entrepreneurs. Could Walmart keep going after Sam? Uh, huh? It's, right? It's gone on to multiple hundreds of billions of dollars. So there is, there are multiple cases in the histories of our companies that we've studied, particularly back and built to last, of companies that had great, great founders. But they went on from there to be

great companies that went beyond their founder because they left inside those companies a set of processes and a set of values. And that's even true for geniuses because Walt Disney was a genius. but he built a company that is still great today. It went through some ups and downs, but it's here today because there was a set of deeply held values and a deep sense of purpose. The one thing that I do believe is embedded in the Apple idea is that we're not here just to make money. We're here to make products that are like bicycles for the mind. You're listening to Motley Full Money talking with Jim Collins. His new book is Great by Choice, Uncertainty, Chaos, and Luck.

why some thrive despite them all. We will wrap up with a round of buy-seller hold. This is a company that has faced some chaos of its own recently. Buy-seller-hold, the future of Netflix. I want to be very clear. I'm not speaking about price. No, we're just talking about the business, not the stock. Exactly, okay, yeah, because you know, you can have a great company that's a bad investment

because its price is too high. So just to be clear about that. Bye. As a general idea for a very simple reason, first of all, I think that Reed Hastings learns. I think he knows how to learn. I think he cares deeply about learning. And every great executive that we've ever studied has made some difficult times or made some mistakes along the way. And the key is they learn from them.

They come back. They get stronger. And additionally, I look at it simply, I love my Netflix. This type of climbing does not involve ropes. Buy, sell, or hold free solo climbing. Now, you're a climber, so tell me why. It's somewhere between cell, and it depends on whether you're the climber. If you're the climber, sell.

If you're the climber, sell. Here's the free soloing. So just so your listeners understand the distinction, there's aid climbing, which is you use the ropes to help you get up. there's free climbing, which is you ascend to the rock totally on your own power, but the ropes are there to catch you if you fall. Then there's free soloing, which is a very simple game. You fall, you die.

If you free solo enough, and there's an increasing likelihood that one day a hold is going to break off, a pigeon's going to fly out in your face, it's going to unexpectedly rain on you, and all it ever takes is one mistake, and you're dead. will it, the reason I say hold, which is on my advice is for free soloers, be very aware of the odds. The flip side is that free soloing is interesting to people, and people will always be interested in people who do that, just like test pilots. And that's why I'm a strong buy on no climbing. No, climbing is actually a big buy for me. I'm 53, and climbing is, I've been climbing for 40 years, and climbing is still a major buy in my life. And finally, your wife is a former winner of the Ironman Triathlon, so buy-seller hold, Jim Collins, winning a triathlon in the next 10 years.

Big sell. You know, there are sports that involve fear. I like those. There are sports that involve pain. I don't like those. So is that yet another reason why you and your wife are a good match? We're a great match. 31 years of marriage.

We got engaged four days after our first date. and we started out in life with nothing together and of all the things that I've been associated with in my life the thing I'm absolutely most proud of is my marriage and I may not be a 10xer but I have a 10x marriage and that I'm very very very proud of the book is great by choice uncertainty chaos and luck

why some thrive despite them all it is a fascinating read some amazing stories in here. Jim Collins. Thanks so much. It's such a pleasure. I really, really love what you guys do. That's it for this edition of Motley Full Money. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.