Motley Fool Money - Netflix Delivers

Episode Date: April 17, 2015

Netflix delivers big earnings. Etsy has a big debut on Wall Street. And Party City gives investors reasons to celebrate. Our analysts discuss those stories and delve into other earnings news. And Google Senior Vice President of People Operations Laszlo Bock shares some insights from his new book, Work Rules!: Insights from Inside Google That Will Transform How You Live and Lead. Learn more about your ad choices. Visit megaphone.fm/adchoices

This message comes from NPR sponsor Paramount Plus and the new original series The Madison. Taylor Sheridan's most intimate story yet. The Madison follows a family raised in a world of digital distraction, forced by tragedy to truly see one another and come together. Starring Michelle Pfeiffer and Kurt Russell. The Madison, new series streaming now only on Paramount Plus. Everybody needs money. That's why they call it money.

From Fool Global Headquarters, this is Motley Fool Money Radio show. I'm Chris Helt, joining me in studio this week. From Million Dollar portfolio, Jason Moser, from Motley Fool income investor James Early, and from Motley Fool Deep Value, Ron Gross. Good to see you, as always, gentlemen. Nice to you, Chris. Earning season is starting to heat up. We've got the latest from big tech, big banks, and big health care. Our guest this week shares some ideas on how you can transform your work life. And as always, we'll give you an inside look at the stocks on our radar. But we begin this week in the world of entertainment.

Shares of Netflix up 18% on Thursday after adding nearly 5 million new subscribers in the latest quarter. And Jason Moser's shares hitting a brand new all-time high. People love them. Some Netflix, don't they? I'll tell you, this is an amazing run this business has had. And I think really the biggest story to me over the past couple of years is how they went from a strategy of initially, slowly. methodically rolling out into these international markets, to completely pulling a 180 and just carpet bombing the entire world, basically, with Netflix. They're just everywhere. And the idea

was that, listen, we know that this is a really, this is a new space, the internet TV space. It's something that's here to stay. Let's get out there and claim our stake while we can. And I think that ultimately has proven to be the right move thus far. I mean, they are just moving country after country after country and doing a wonderful job of it. And, you know, the call to me, Reed Hastings continues to show, I think, a level of, I don't know if it's modesty, but he just, he seems to be a CEO who has developed into a really good leader of that business. And Ron, some of the original programming they've done on Netflix has won awards. Awards are nice, but unless you're actually bringing in new subscribers, that's all they are.

but they're bringing in the new subs. They are, and I think I'm the perfect barometer. I, you know, year or two ago, I would have said, new content, what? I'm not going to be watching that. And then now I'm a house of cards junkie. And I would consider my family to be heavy users of Netflix and Netflix content. And I think they've done a fantastic job. How much time in a week do you allocate to Netflix viewing?

Just at curiosity. You're heavy users. I would say it's more to regular television than it is Netflix television. But there's a couple few hours, maybe two, three hours? A week? Yeah. That's it? That's not so much, actually.

Well, get ready for more content. I mean, they are now carrying about $10 billion in commitments obligations here, and that's expected to grow by three to $5 billion here in the coming couple of years. So, you know, it costs a lot of money for this business to run, and you can see they were opening up there. They have an initiative at the next shareholder meeting. They're going to try to vote to get the number of shares outstanding up to $5 billion. So that implies a couple of things there.

more than likely, we're going to see a stock split that was mentioned in the investor letter. But also, they're going to need to continue to raise money because this is a business. It's just feeding this big cash monster that just eats it up. So the sign to look for there is you look at revenue growth and you look at that growth in the content commitments. Right now, they're pegged it pretty much even around 31%. If we see a point in time where revenue growth starts slow, and I'm sure we will see that point in time at some point. But that content commitment number keeps going up, that's when I think shares could be feeling a little bit of a pinch. But you wouldn't fault them for raising capital.

No, not at all. You have to. I mean, you have to. Despite the dilution, you have to grow the business. And you would offset the delusion. It's not dilution if they get fair value for their share. Think about the big winners in all of this. It's the people making that content.

I mean, they are just throwing money left and right at these people. And, man, if you can come up with a good show idea, they are really doing well with this. It's between Netflix, HBO, Amazon, Hulu. you know, all of which Hastings called out in that call is basically that is the future of TV right there, and Netflix is going to be a big part of it. Do you think at some point they start throwing money at live sports programming? That's a good question. You know, that was actually something that was brought up in the call. And short answer, no, I don't think so. And they explained it basically is it's not really what

their core customer offering is about. You know, they're looking, their customer is about on-demand entertainment. And with sports having more of a live dynamic to it, they don't see that as something that's necessarily in their wheelhouse, at least at this point. They changed their mind on that international expansion, too. So maybe one day, you know, an opportunity arises, but I don't think we'll see it any time in the near future. Well, not everyone is sold on Netflix's original content. Email from longtime listener Bud Turner in Palmdale, California. I've yet to get through the first episode of any of their new shows. However, my wife and I have watched every episode of The Office several times. Currently,

I'm halfway through a MASH marathon, which is a lot better now that I'm 45 years old, as opposed to when I watched it when I was 10 years old. Intel's first quarter profit just 3% higher than a year ago. But the stock moving up on what is on balance, Ron, kind of a mixed quarter. What's going on here?

I like this report. Their business is strong where it should be in the data center business, the growth part of the business. PC is weak and it's lumpy, but you would expect it to be. They're going to make money in the PC business when they should. I think the release of Windows

10 coming up is a good example. So I like this, I kind of like this report. There were reports last month that they were in advance talks to buy rival chipmaker Altera. Those appear to a bit cooled off a little bit, but if they go ahead with that, that's an acquisition that's going to cost them somewhere in the neighborhood of $18,000, 20 billion dollars. It's by far their biggest ever. Is that the right move for them? Probably not. It is complimentary, but it's a big number. But they're cutting back on Capax. They've got a nice dividend and yield. I like what they're doing with capital allocation. $18 billion, $15 to $18 billion, probably not the best decision.

First quarter profits for Johnson and Johnson fell 8.5%. They also lowered guidance for the full fiscal year, James. So not surprising, I suppose, that the stock down a little bit this week. Yeah, pharmaceutical business was pretty good. But overall, the revenue was down 8%. Earnings down 8%. But the story really isn't about Johnson and Johnson. It's about the dollar. Johnson to Johnson is similar to so many other U.S. companies, Kimberly Clark, Procter, and Gamble, and getting much of their money from overseas. I think J&J only gets about 46% of its revenue here in the U.S. So the real question is, what's going to happen next with the dollar? I'm personally betting that over the next several years we're going to see a reversion. So J&J's and these sort of conglomerates are going to do better. But this story affects much more than J&J. It's not really a J&J's story. Would you look at this stock, which has had a pretty nice run over the last couple of years, and as we've talked about before, part of that is they got into a good groove with various divisions just operating the way they should. In the past, one division or another would have some sort of recall or really sort of hit the overall

performance. They've had a nice run here. But does that mean that if someone is looking at this behemoth healthcare company, when they look at the stock, is it pricey? You know, a lot of these blue chips, and this is not J&A's fault, but a lot of the blue chips have been where investors have turned to during this time of relatively good earnings, but also relatively high financial uncertainty. So I think J&J is not the cheapest stock in the world. Long term, it has the catalyst of the aging baby boomers, and it's a decent company, but I wouldn't be like backing up the truck at these prices. You mentioned foreign currency, just a general question to anyone that wants to chime in. And when you do your modeling and you look out into the future, do you try to predict foreign currency, or do you mostly say it's going to come out in the wash, it's going to work itself out and kind of...

I generally don't, especially for a company like J&J, because they have so many moving parts. You know, it's not just like a two-country foreign currency model. It's a multi-multi-multi-country model. And a lot of these companies have hedging. So if you really want to model, you've got a model for all of that. And it's sort of like modeling an integrated oil company. It sounds good. But then once you actually start to do it, it's like immensely.

more complicated than you've set out to do. Financial modeling, not nearly as good looking as the regular type of modeling. Staying in the healthcare industry, first quarter profits for United Health rose 28% revenue up around 13%. They also raised guidance, Jason, which makes me wonder, why is the stock down a little bit this week? This was on balance, a really good quarter. The one-two punch of a good quarter in raising guidance, usually you get a little pop off of that. Usually you do. I mean, United Health is a very big company, though, and it's

impossible related to tell, you know, those sort of the machinations, the day-to-day sort of gyrations, the market throws us. But I mean, you know, there's gold in those health care hills, and these big, diverse health services companies like United Healthcare know it. And so they are building their business accordingly. And so you look at the population dynamics of the United States coming here over the next, you know, 20, 30, 40 years. And we're going to have a significant boost to our population of senior citizens. And so United Health Care is going to be one of the best plays on that. They just recently acquired Catamaran, which is a pharmacy benefit manager, and that's going to be something I think that adds some nice staying power to this business.

Medical care ratio was down a little bit. We just want to kind of make sure those medical care costs sort of stay in check, but this is a big company where scale really matters. Do these middlemen add value to society? I mean, I'm just, they do see all the middlemen, right? So I could pull out my insurance card. We probably held the same thing. I've got about 12 different logos on here. I don't really know even what the actual company is my insurance is covered under. So, I mean, somebody's getting paid and there are a lot of costs that don't seem to be related to health care. I would put these pharmacy benefit managers, honestly, on par with lobbyists. I feel like we could do without them, because you're right. All they do is they

negotiate with the big farm companies on behalf of the insurance companies. It's part of the process, right? I'm not sure why it exists. I don't know why we have lobbyists. I think that's what the founding fathers intended, isn't it? People should, you know, be able to have someone represent them to the Congress. It doesn't seem that. It seems like all it talks is just money these days, Chris. It's all about who's got the biggest checkbook, right? Any disgruntled lobbyist can email Jay Mozer at fool.com.

I'm happy to entertain that. A couple of big banks, and we've got a couple of hot IPOs. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, James Early, and Ron Gross. Mattel's revenue. for the sixth quarter in a row, but James still not as bad as analysts had feared. So amazingly,

shares of the toy maker up nearly 10% this week. Well, you know, a couple of things going on. I mean, first of all, long, big picture, the hard part about making something that nobody wants to buy is that nobody wants to buy it. And that's been Mattel's problem trying to get kids to buy their toys. They don't have the branding that Hasbro has. Barbie sales were down 14% in the past year. Fisher Price and American Girl rose a little bit. But they have a new CEO. and I got to say he's talking a good game. He's basically saying, look, we're pathetic, we need to change. Without actually saying, we're pathetic.

Without actually saying we need to change. So they're going to try crowdsourcing, going to try getting toys to market faster. They don't seem to be doing the Hasbro route of just licensing, licensing, licensing. So we'll see how that works out for them. But basically, it's either going to be a success story or it's going to be an activist campaign in the making. I'm not saying it can't work. But when you look at the licensing that Hasbro has done over the last five years or so, I have to believe there are people maybe on the board at Mattel or within the company who are agitating for that route.

Well, it's tough. First of you got, Mattel, Hasbro, and Lego is now the number one toy maker in the world. The Mattel and Hasbro are the only two that have a global distribution network. So I just bashed Mattel, but to its credit, and I did sell it from income investor recently. To its credit, it has an immensely valuable footprint. It can get products into store shelves. But, yeah, I mean, Hasbro has got the frozen deal now. They've got a lot of good deals from Disney from other places, and it's hard for Mattel to come in and edge them out, I think.

Has there been activist buzz yet? Not to my knowledge. I think you're right, though. Not to my knowledge, but, yeah. I mean, they're just, it's coming. If they don't turn around soon, it's coming. I think this Mattel story really is one of failed leadership. I mean, this leadership change over here.

The new CEO continues to talk about how really they need to basically just install a new culture. The culture of the company has been toxic for so long. And who in the world let that Disney deal go? I mean, how do you not just say whatever working up, but we just got to get it? Yeah. I got enough. Poor decision. JP Morgan Chase hitting a 15-year high this week after first quarter profits rose 12%.

That was higher than expected, Ron. Good week for Jamie Diamond. Good week. Another great stock I don't own. It's pumping up on its highest stock price ever. I think we said early in the week it had only reached a higher level in March of 2000. And report looks good. The biggest areas of strength was in trading, both on the fixed income and the equity side, but really all of the segments, the four main segments, turned in solid results. You have their kind of ongoing legal issues. They had to pay a billion dollars to both US and British regulators recently. The investigation into their manipulation of the foreign exchange market, certainly not a good thing, but they're looking to put that behind

it. Legal expenses, this quarter, was $487 million. and that will slowly start to dissipate as they do put these troubles behind them. So, Jamie Diamond, continuing to execute, we've talked before about people saying perhaps the bank would be worth more if it broke up into smaller pieces. I think a report like this and seeing the stock price where it is gives Jamie Diamond some nice fuel to say, no, we're executing just fine. Sticking in the banking industry. Bank of America's first quarter profits came in at $3.4 billion.

One of the best quarters since the financial crisis. stock's still down for the week, James. This kind of seems like, well, what else do they need to do? They're bumping up against reality, Chris. The past couple of years has been actually pretty good for Bank of America just by being less bad. I mean, they were pathetic before. So by being less bad, their stock has risen,

but now they've actually got to do something. I mean, they profited this quarter because of the removal of legal expenses, which they just didn't have and some cost cutting. But that's not really the way they want to do it. I mean, these guys were sort of like the big lumbering friend who got brought to the party don't have anything to say. I mean, soon enough, they're notable because

they're so big, but now they've actually got to do something and so far they're not doing it. Are they finally out from under the horrible train wreck that was the countrywide acquisition, or are they still paying for them? I think they've got most of that behind them. I think the legal expenses, I think the settlements are mostly done. So now

it's on them to actually run the ball just by themselves. And I totally understand what you're saying in terms of cutting legal expenses is not necessarily a pathway to growth. But just to give some specifics around this, their legal expenses for the quarter were $400 million. A year ago, they were $6 billion. So obviously, it's nice to be paying that much less. But holy cow, what's going on? Yeah, that's a relief. Right. Yeah.

Paying out $6 billion in a quarter. Yeah. Two IPOs getting attention this week. Etsy, the website selling unique handmade goods, saw its stock nearly double on Thursday when it went public, while shares of Party City, the party supply store, rose just over 20% on the day. Jason, I'll just start with you. Either of these businesses of interest to you as an investor? I'm probably going to take a pass on Party City, though. I do like your philosophy that you walk in there, and really no matter what, you're going to be smiling the whole way through. I like fascinating story to walk through.

It's one of the few shopping experiences I genuinely enjoy. I like going to Party City. How often do you go to Party City? A couple times a year. Chris is a, he's his party guy. Etsy, I think, is an interesting story. I mean, I think this is one where price is going to really matter. And the IPO of the stock, I think, basically double the first day.

Friday was a bit of a down day for the stock. I think its valuation assumptions right now are way out of whack, given the potential market opportunity for the company. It's a bit of a niche type of service. It's like the eBay for handmade trinkets, right? Yeah, and I think they're basically trying to take that global. and just sort of make, give that sort of e-commerce space for just that local feel in regions all over the world. So we'll see how well they're able to pull that off.

But, you know, it's typical IPO, not profitable yet, and we need to really see some money being made here before I can be convinced. Yeah, for its valuation, it's a relatively small company still, Etsy, 200 million revenue, as you said, not profitable. I don't really see a desperate need for this company to go public. I think it's more about the venture capitalists, wanting a liquidity. event and exit strategy, which is something that I don't love. I do applaud their corporate culture. They're very big into social environmental issues. How do you know so much about their corporate

group? They're considered to be what's called a B-Corp, and they're the largest B-Corp ever to go public, which is a sign of their culture. So I do applaud that, but I'm not a big fan of the company. At least Party City is profitable. They have a franchise model as well as a company-owned model, mostly company-owned, probably some areas where they can continue to grow. But the valuation doesn't make sense. And they make about 70% of their own products. So they do have that going for them. Before we wrap up, Ron, for anyone listening, what's one tip for throwing a good party? You're a good host. What's one tip for throwing a good party? Mix good drinks.

That's it? That's it. Are you kidding me? Of course that's it. Jason, you got anything? Don't want out of beer. James? I'm not good at sustaining a conversation, so I'd have to have some theme that everybody else can do something together, instead of just sitting there talking. Twister? I was going to say the same thing at Twister. Maybe, yeah. Aren't we, I feel like I'd throw up my back.

What is your secret? Separate the food and the drinks. Food in one area, drinks and the other. Okay. There you go. You're welcome, America. Up next, best-selling author, Laslow Bach, talks about what you can learn from Google to transform your work life. This is Motley Full Money. Welcome back to Motley Fool Money. I'm Chris Hill. Laslow Bach, his Google's senior VP of People Operations. He's also the author of the new bestseller, Work Rules, insights from inside Google that will transform how you live and lead. Motley Fool CEO, Tom Gardner, recently interviewed him before a live audience in Washington, D.C.

And he began the interview by asking Bach why he wrote the book. Two things happened. One is, I've been lucky enough to work at Google, which is an amazing place to work. There's a lot of There's a lot of things that are not great about Google, especially like any company. Once you're on the inside, you sort of see all the broken stuff. It's an amazing, amazing place. Number one. Number two, I've had a bunch of crummy, awful jobs leading up to it. You know, I worked as a lifeguard.

I worked in a library. I worked as a waiter at the Olive Garden. I worked as an actor. I worked at the... Olive Garden's fine. I was at small companies, big companies, way too many companies for any single person to have worked at. And I realize that in most cases, for most of us, we spend more time working, now that there's no more 40-hour work weeks,

we spend more time working than we do anything else. More time than we do sleeping, which is crazy, more time than our hobbies, and even more time than the people closest to us, right? You spend more time with these weirdos at the office than with the people you love the most. And for most people, work just sucks. It's not fun. It's dehumanizing. It's not rewarding.

what I saw at Google and actually getting to know folks like Tom and people at other companies and some academics we work with is it doesn't have to be that way. So the point of the book is to really try to open source not just some of what we've done at Google, but what we've learned in working with other companies and looking at other companies in the hopes of actually trying to make work better everywhere.

So Laszlo doesn't know that I'm going to do this, but we're going scenarios with you, Laslo. You've just been hired to run the people team at a 72-year-old manufacturing company. One of the things you're asked to review is the company's mission statement and you see a long, semi- eloquent, reasonable, responsible mission statement. What do you do about it? I reject it out of hand.

Mission statements are awful and torture. And they're terrible to write. Has anybody here tried to write a mission statement? And has anybody loved it, the process? So it's just miserable. Because they connect to things like shareholders and profits and customers. and what they really should connect to is what matters, a meaningful mission.

And so I would look at that and say, okay, this is great that we're manufacturing widgets or chairs or microphones or whatever it is. Why are we doing this? Whose lives are we changing? What is the real reason these people come to work all day? And I try to build a mission statement around that. The company is very proud of its management training program.

It's invested heavily in that. Training managers and giving them autonomy to hire their teams, evaluate the performance of those teams, influence compensation, and promote and terminate employees on their teams. So managers come first is really the approach at this firm. What's your approach? So my approach is managers come last. We at Google try to take as much power away from managers as possible.

And the reason is, you know, there's the sort of the standard line about, you know, no one person is as smart as all of us, right? When you become a manager, actually 300 years ago, Lord Acton wrote, power corrupts, absolute power corrupts absolutely. So when you become a manager, you start demanding things from your people. You start micromanaging, you start telling them how to do their job, because you're on the hook. You want to deliver.

It's a normal human response. But you as an employee want freedom. And managers forget they're also employees and forget how we actually want to be treated. So I would start looking for ways. I'd say this is all fantastic. How can we keep what's good? but how can we actually reduce the amount of power managers have by maybe not letting them make hiring decisions

or getting other input on things like promotion decisions so that they can actually just focus on helping their people rather than controlling them. The company's doing a lot of hiring in the year ahead. Traditionally they spend three and a half times more on training and development than recruiting. So that's all backwards. It's all backwards.

And actually, that's really typical. Most companies spend more on training and development than they do on recruiting. In the U.S., actually, in the U.S., we spend corporations, spend, I can't remember the exact number, but we spend a third as much on corporate training in total as the entire U.S. public school system spends on education, right? And say what you will about the public school system.

I'm a product of it. I'm a fan. But I promise you, you all learned more in fourth grade than you did in your average year at a corporate going to corporate trainings, right? Or in any single year of school. So I would actually say cut back on the training, overinvest in recruiting instead, because you're much better off really being scientific in how you hire and hiring people who are measurably above average than you are hiring average people,

which is what most of us do, and trying to turn them into superstars. That's just really hard. Companies spending a fair amount of that recruiting budget on making sure they can get candidates from America's top universities. No, no, I already hear people. Like, don't do that. Don't do that. Thank you.

I actually, so we did, when Google was small, we used to always focus on where'd you go to school? What were your GPAs? What were your SAT scores? It doesn't matter if you were 20 or 30 or 50 or 60. We hired Vince Surf, one of the co-inventors of the internet. And I think he was hired before me. He was probably late 50s, early 60s. And again, he co-invented the internet.

And he was asked for his transcript and GPA. And just like I was, and when you're small, it's easy because you only need to hire a few people, and it's kind of, okay, I'm just going to pick off the top kids. But the reality is a big part of getting into these schools is knowing they exist, knowing how to test, having the financial means to do it, the financial means to prepare. And I don't just mean even affording, but your mom, your dad, saying, like, yeah, you should pursue this dream. Because a lot of moms and dads quietly say, there's fascinating research on this, quietly say, like, oh, yeah, college is a great idea, but maybe stay close to home, or maybe community college.

because they know they fear they want to have the money for this so we recruit from all kinds of schools almost a thousand schools we don't care about where you went we don't care about your GPA it's somewhat predictive of performance the first two years but after that not at all and I would tell this company you're you're hiring all the wrong people a few more of my questions and then we go to your questions can everything about a person's performance be measured and should it even be attempted no I don't think everything can be measured I think we can be much better than we are.

But a lot of what we interpret as success or failure is actually random noise. There's this thing called the fundamental attribution error. And what the fundamental attribution error is, is it's this cognitive heuristic, it's a cognitive flaw we all share, which basically says if something went well, it was thanks to me. And if something went poorly, it was your fault. the market moved or I didn't get the right materials from the sales marketing department or the technology department didn't deliver what I needed and we all make this mistake.

So point one is that it's actually difficult to pull out the random variation from human performance. So this was part of what was behind how we changed our performance management system. We used to have a 41 point scale. So every quarter you'd get a rating and we take a four quarter average so you could be like rated at 3.176 and it looked incredibly precise but it wasn't accurate because we had at random variation and we went to a five-point scale. So number one is try to, it's important to remove what's the random variation.

So you actually get an honest sense of performance. Number two, the way you do that is you actually need to look at people from multiple perspectives. So every Google employee gets an annual review that includes written feedback from their manager, from peers, from subordinates, and ideally from people they just happen to work with. And those people aren't assigning performance ratings, but they're actually just saying, Here's the one thing Laslo can do better. Here's the one thing he should do more of. The other thing is when we assign performance ratings,

and the broader lesson is you want to do it as a committee. You don't want to let managers individually just say, here's how you performed for the reasons we discussed earlier. So we have what we call calibration committees where a bunch of managers sit down and they have draft performance ratings for employees, and they all compare notes, which not only removes a lot of the bias,

I'm an easy grader, I'm a hard grader, but it actually allows people to get to know one another, across the organization much better. So there's a bunch of things you can do to get a much better read on and reliable read on human performance. But I think capturing everything, you know, we're messy, complicated things. Like that's really hard. You mentioned the word bias. I think one of the most enlightened things in organization can do is to admit we're all biased, every single one of us. So how do you attempt to counter bias? What has worked and maybe is there an example of something that hasn't worked in your attempt to counter bias?

Yeah, what's funny, this actually, this came up in an email today. So what has worked is, you know, we, so the tech industry is not great on the diversity front and Google is not great on the diversity front. If you look at our company, and we made a decision to share our data on this publicly last year and a lot of companies kind of did the same afterwards, and it revealed that almost no tech companies at Google on the non-technical side. So half the company is sales and other functions. We're about 50-50 men and women.

On the technical side, we're 17% female, 83% male. And if you look at technology as an industry, computer science, it's about 15% to 19%, depending how you look at it, female. The rest is male. So we're kind of about at industry, but it's an appalling number. And it's not just a pipeline issue where women aren't coming into the field. Women with computer science degrees historically tend to leave the field because generally technology is not a real welcoming environment for women.

So we have this issue. What we've been doing to combat it at Google is a whole bunch of things. But the one that's most salient is working on unconscious bias. So just as we're biased when we're evaluating people around us, we're biased in our human interactions. You know, I'm not to go too deep, but, you know, I'm white, I'm male, I'm heterosexual, I'm over 40.

I get a lot of privilege from that that I don't even realize because I just sort of live it in the world works that way for me. I don't experience the world the way people who have a different makeup experience it. And as a result, I probably overlook a whole bunch of things. There's also research that says that if in a group, in a team, in a meeting, if less than 25% of the room is one population or another, black or white, gay or straight, male or female, everyone in the room on a subconscious level is aware of that. And it changes behavior. And it's only when you get closer to balance that people actually start treating people more

fully as human beings. So the thing that didn't work for us is we have an internal program that's mandatory, that's a training everyone has to go through about you know what the law is and what's the appropriate way to manage people. Actually in California there's a law that requires everyone is a manager must have sexual harassment training every two years and it's not training in how to do sexual harassment it's training in how to spot it and avoid it and and what we found is people come out of the training and says, you know, it's not really relevant or they actually have one of three responses. I don't need this because of course I'm never

going to do that. Or they say this is bogus and a complete waste of time and why are people telling me to do this stuff and I'm just being me and you know a joke I make once in a while, why do people have such thin skins? And then you have another large group of people who say, okay, that was interesting, I don't really know what to do with it. So that, we've been doing it. It's okay. Gets a little result, not great. We developed an unconscious bias training program and you can Google it and it's online and you can watch. You can actually, least watch the video we have of it to give you a sense. But what we found is if you try to tell people to change their values and belief systems, people really don't like that. And they

don't actually change their belief systems because it's kind of who we are. If you explain to people that we're all biased, right? And the simplest bias is, you know, like optical illusions. We look at optical illusions and it's like, oh, there's two lines with the arrows pointing different directions, one looks longer than the other. Surprise, they're both the same length. We have errors in our judgment. And from there, you can take something, Harvard has something online called the implicit association test, which when most people take it reveals actually most men and women and people who are LGBT actually have a slight bias against women. Very slight, but almost everybody has it. And then you sort

of take on more sophisticated cases. And eventually what people realize in this is that we're all biased. And the beautiful thing is, again, you don't change people's values. What instead happens is when someone walks into a room where there's one woman and ten men or one transgender person and everybody else is heterosexual, they kind of, instead of going like, this feels a little weird, or instead of just like unconsciously responding, they actually pause for a moment and go, okay, this is different. And the mere act of reflection causes you to not react with your subconscious mind, but to react rationally. And you go, oh, oh, it's a person. Okay.

Well, let's make sure I include that person and involve them. And the results from that have been phenomenal inside the company, and we're hoping to share more of that, hopefully later this year. My last question before we go to the crowd. Just talk about Google's decision to share the insights that you have in your people team and people analytics, and why have you made that decision? I mean, presumably, a shareholder of Google could say, that's a great competitive advantage of ours.

We've developed all this stuff. Laslo is, he's our IP. We don't want them to give that stuff away to others that compete with us. Well, when I go back to the office on Monday, I'll find out if I still have a job. We actually had that exact conversation. You know, a competitor can take this and improve their recruiting process. And, you know, the talent competition in the tech industry is absolutely ferocious. Absolutely ferocious.

I mean, companies go head-to-head over candidates all the time. Great people can switch to any of a bunch of companies. I mean, take Google, Apple, Facebook, Microsoft, Twitter, Twitter, Uber, there's all these companies all the time. People can just pick up the phone and say, I'm ready to leave and get a job anywhere. But the resolution to the debate was that if companies do what I've described, if they hire like Google does, what will happen is not that we're going to lose more candidates. What's going to happen is candidates will actually end up at companies where they're a better

fit. So the person who ends up at Amazon, instead of Google, is going to be somebody who's a much better fit for Amazon because their culture is distinct and their values are distinct than were Are they at Google? And we will end up with people who are better at Google. And everyone will kind of win. And independent of that, the competitive risk we're taking in sharing this stuff I think is outweighed.

And we agreed, you know, the executives I talked to and got a lot of sign-offs and approvals. We agreed that the benefit outside of Google outweighs the competitive risk we're taking by far. And so it's the right thing to do. Thank you. Laslow Box book is Work Rules, Insights from Inside Google that will transform how you live and lead. It's already a bestseller, so check it out when you get a chance. Up next, we'll give an inside look at the stocks on our radar.

Stay right here. You're listening to Motley Fool Money. On Mondays, I never go to work on Tuesdays. I stay at home on Wednesdays. I never feel in fine. Work is the last thing. Being on my mind on Thursdays, it's a holiday. It helps me make up my mind.

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. I'm Chris Hill, joining me in studio once again, Jason Moser, James Early, and Ron Gross. Guys, before we get to the stocks on our radar, once again, April is financial literacy month. So if you're a beginning investor or you know someone who wants to get started in investing, check out The Motley Fool Guide to Investing for Beginners.

It's our brand new ebook. It's on Amazon for just $2.99. Ron, that's a steal of twice the price. And my pictures in it. So three times the price. Oh, my goodness. There you go. The Motley Fool Guide to Investing for Beginners.

It's a 75-page e-book. Just $2.99. He can give it as a gift. All right. What's on your radar, Ron? I like Modine manufacturing, ticker symbol M-O-D. Small cap company recommended in my Deep Value Service. They manufacture heat transfer products for trucks, cars, industrial equipment, all sorts of industrial equipment like tractors. Caterpillar

deer would be big customers of theirs. I just raised my valuation estimate this week because they're closing a facility, cutting costs, and kind of consolidating some of their operations. So I love that. I think you've got at least 35 percent upside on the stock right here, and that's a pretty conservative estimate. James Early, what do you got that? I'm going with Sebespi. The ticker is SBS. This is a Brazilian water and sewage company that is a little bit more than 50% owned by the state of Sao Paulo. This stock has been kicked in the teeth since 2013. It's down like 80%. A lot of it is because of the Brazilian real. The currency has just been terrible. So I think that's going to be a mean reversion catalyst. These guys also are due for some kind of a rate increase. So when that happens, when the currency turns around, this could be a big winner. Jason Moser, we've got about a minute left. What do you got? Sure. One I've mentioned on the show before called WageWorks, tickers W-A-G-E, and WageWorks provides consumer-directed benefits program. So think about things like we have here, a flex-spending accounts that you can use for medical expenses or child care expenses. So this is the company. That's what they do. That's the only thing they do. And they consider their special sauce to be in their technology. And it seems to be working because they continue to bring more fortune companies under their umbrella. But they have earnings coming up here, May 5.

fifth, and the stock is starting to pull back a little bit, and it's catching my interest. It's one that I always felt was a little bit out of its range. It's a compelling value proposition. It helps companies save money on their payroll taxes. It helps us save money on our taxes by contributing those pre-tax dollars. And it's a scalable business. It's a predictable business. And really, most importantly, it's a profitable business. All right. Ron Gross, James Early, Jason Moser. Guys, thanks for being here this week. Radio at fool.com is our email address. That's Radio at Fool.com. Drop us a note. Send us your questions about the world of stock investing. And check out the Motley Fool Money podcast on iTunes. If you like what you hear, please feel free to write a review or rate the show.

And if you want more stock market commentary, check out our daily podcast, Market Foolery. It's our take on the day's business news. That's Market Foolery. You can find it on iTunes, Stitcher, tune in anywhere podcasts can be found. And that's going to do it for this week's show. The show is mixed by Rick Engdahl. Our producer is Mack Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.