Motley Fool Money - Stock Market Hits Record High

Episode Date: June 21, 2019

The S&P 500 hits a record high as Wall Street (and investors) read the latest tea leaves from the Fed. Slack makes a successful debut in the public markets. Facebook introduces a new cryptocurrency. And Oracle hits a new high. Motley Fool analysts Andy Cross and Ron Gross, and Jeff Fischer of 1623 Capital, discuss those stories and weigh in on earnings from Adobe, CarMax, and Darden Restaurants.   Thanks to Sprout Social for supporting Motley Fool Money. To learn how your brand can create real connection, visit http://sproutsocial.com/fool today.   Download their FREE guide, “Seven Key Strategies to Grow your Profits” today at http://NetSuite.com/fool Learn more about your ad choices. Visit megaphone.fm/adchoices

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Sprout Social offers businesses an intuitive platform to help build meaningful relationships at scale on social. To learn how your brand can create real connection. Visit Sproutsocial.com slash Fool today. Everybody needs money. That's why they call it money. From Fool Global headquarters, this is Motley Fool Money. It's the Motley Fool Money Radio show. I'm Chris L joining me in studio this week from 1623 Capital, Jeff Fisher and Motley Fool Senior Analyst, Andy Cross, and Ron Gross. Good to see you as always, gentlemen.

Hey, Chris. We've got the latest headlines from Wall Street. Upwork CEO, Stefan Kastriel is our guest, and as always, we'll give you an inside look. with the stocks on our radar. But we begin with the big macro. The S&P 500 index hit a new all-time high in the wake of this week's Federal Reserve meeting. The Fed indicated a willingness to cut interest rates in the coming months. Andy Cross, I'll start with you. It doesn't seem like our strong U.S. economy necessarily needs interest rates to go lower, but I am not going to complain about my index fund going higher. Yeah, I mean, absolutely. Compared to where we were in December, it seems like years ago. So it's been a

a nice run this year. It's been a little bit rocky earlier on, but clearly a lot of excitement. You know, I think a lot, the Fed talk over the past few months has driven a lot of the big macro money that's flown into the U.S. markets that's driven a lot of the stock prices because we're one of the few large growing economies. There's a lot of money that still is going into our stocks because that's where the growth is. A lot of excitement with some of the initiatives from the IPO market, but just from the S&P 500, big companies can continue. You need to put up fairly good numbers on the growth side, not great, but fairly good. And when you're looking for some growth, if you have a lot of money to spend, you're going to look in the U.S.

Yeah, for sure, Wall Street loves lower interest rates. That's just a given. But let's not forget why the Fed may feel the need to do this in terms of lowering interest rates, easing monetary policy. It's because they see slowing growth, both domestically and internationally, which can be problematic. I mean, that can lead to recession, obviously, which is something no one wants to see. So they're trying to be proactive about it. Inflation remains tame, so I think they feel that they can get this done if they need to. And, in fact, traders are pricing in 100% chance of a cut this coming...

100%? 100% is what they're doing. In this case, it is. So it looks like it's going to happen, barring any unforeseen circumstances over the next few weeks. But we really do want to keep an eye on GDP because somebody's seeing some slow. growing growth there, for sure. Well, I have to ask this question, even though I think we all know the answer, but is the Fed here? Is the ECB, are we all now addicted to stimulus or to propping stocks

up whenever they drop? We're seeing the markets more manipulated, as the world, I'll use, than any time in my lifetime. Yeah, I think the answer is yes, and it's part political, the political climate, and I'm sure the Fed feels pressure there. not supposed to, and let's hope they remain independent. But for sure, we like our stimulus. You know, I don't know if we ever go back to the monetary easing, where we kind of build up the balance sheet. Again, I'm not even sure that really served its purpose. It seems like

interest rates are a much better way to stimulate the economy. But for sure, we focus awfully a lot of our time on the stock market itself rather than underlying economic. Well, you're seeing it also in multiples, Jeff. The multiples of the price of sales for the S&P 500 is at certainly probably a 15-year high and more than 2.2 now. And you've seen a lot of stocks. I mean, the IPO market is as hot as it's been, really, since we practically joined the Motley Fool back in the late 1990s.

So a lot of excitement around people spending money pretty much on U.S.-based stocks, although the IPO market globally is pretty hot, but really on U.S.-based stocks, because that is really the crem de la creme really of investing right now. Definitely. The economy is doing pretty well here. If investors are always hoping that the government will step in and prop things up, it's interesting to see how that'll play out long term. Let's get to some earnings. Shares of Oracle up more than 5% this week. Fourth quarter profits and revenue came in higher than expected. And Jeff, Oracle is closing in on a market cap of $200 billion.

Yes, Chris. And it's the stock that everyone thinks went nowhere in recent years. And in some ways it didn't, but it actually doubled in the past seven years. It more than doubled the past seven years. So it's gone up more than the S&P does on average over its lifetime. And this quarter, finally, they saw real good growth in database license sales, so everyone's happy to see that. Overall revenue growth is still modest at 3% year over year, but they expect that to tick higher next year in this new year. And they do expect earnings per share to grow at least 10% year over year. Now, that said, Chris, they bought back $36 billion dollars in stock in the past 12 months, at an average $49 per share, the stock is more than 10% higher now.

But still, that's a lot of money to spend on your own stock. And does that speak to how strongly they feel about their business and the software industry as a whole? Or does that speak to, we don't know where else to put this money? Yeah, that one. Yeah. Option B. So the shares are still inexpensive at 14.4 times as to baneered earnings for next year,

but it's also still a slow revenue growth story. Quarter profits and revenue for CarMax came in higher than Wall Street was expecting, and shares of CarMax up on Friday, and Ron, hitting a new all-time high. Boy, is this company getting it done? Up 37% of the stock this year. Metrics continue to be really positive. Net sales up 12% and comp sales up 9.5%. They're strong on the used unit sales, up 13%.

Also strong on wholesale. The auto finance unit, kind of lackluster, up slightly. Nothing to report really there. that all translated into a profit growth of 12%. So really doing well. They're now focused on this omni-channel experience, they're calling it, rolling that out to majority of customers by 2020 so you can use their services at home, in store, a combination of both.

That's kind of their next move. Speaking of repurchases, they repurchase 3 million shares during the quarter. Average price of about $68. Shares are at 86 right now, though. So that seems like a nice use of capital, as long as things remain solid. So really nice job by the folks over Congress. Ron, they sell cars, right? They sell cars.

They buy and sell cars. Yes. It's funny that they're doing so well, and yet the automakers are not. But I mean, that speaks to the used, obviously. But it's interesting. You see them trading only at 16 times earnings for some of the typical auto nations and the Penskees of the world trading. you know, like eight or ten times. So you're paying a premium for the CarMax experience

versus your typical used car dealers. I actually bought a car from CarMax a year ago, and I have to say it was the best experience I've had buying a car, and it still can be improved. There's still a market opportunity for someone out there to make this even better, even more streamlined, and take less time. Well, speaking of that, Chris, is actually a relatively new IPO called Carvana, CVNA, on the market that is trying to disrupt. the used car buying experience. They call them vending machines filled with cars along the side of the road. It's interesting.

Another week, another hot public offering. This time it was Slack. Shares of Slack made their public debut on Thursday. Technically not an IPO, Andy, but shares up nearly 50%. Yeah, direct listing so they didn't actually issue new stock into the market. So it was like a matching of buyers and sellers. But Slack has really become the proverbial office cubicle and water cooler. are all wrapped together into a slick cloud-based architecture where people and companies,

like the Motley Fool, use it as their primary collaborative tool to communicate and to work better together. So, they Slack pretty much is defining how people and how offices and workplaces communicate. One billion messages sent per week. Average usage is 90 minutes per day. I think mine's probably a little bit higher than that. 600,000 total customers, Chris, but 100,000 of those are paying. So they have a freemium, a free-to-pay kind of model.

645 customers contribute 43% of revenues. Those are ones that generate more than $100,000 in annual subscription. So a lot of excitement around Slack, obviously a lot of excitement, as I mentioned earlier, around the IPO market in general. As a direct listing, the last one and the only one that I know, Spotify, do this. This was more successful than Spotify. So, like you said, Chris, a stock listed at about 26 and now it's about 38. So a very successful debut.

Still not profitable, interestingly. 34 times revenue at IPO, or direct listing. I don't know if we can use the word IPO. So even higher multiple now. So they've got to really put up that growth to get me interested. But I do like the product quite a bit. Well, on that growth side, it is nearly doubling sales every year. Well, and I think we all like using Slack.

But it seems like it was maybe a year, a year and a half ago. We were talking about the private market valuation of Slack being somewhere in the neighborhood of $8 to $10 billion. Here we are. It's $24, $25 billion. It's hard not to look at this. Even as a great business, to your point, Ron, it's unprofitable. And they've got some high expectations built in. High expectations.

Six largest shareholders or institutions control 60% of the stock. It's going to be interesting to see what they do with their shares. And that's going to control the supply and demand, which will impact the stock price. Get the popcorn because Facebook's hoping to create a global currency. This ought to be fun. So stay right here. You're listening to Motley Full Money. All right, before we get back to the headlines, let's talk about your business for a second.

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With NetSuite, you save time, money, and unnecessary headaches by managing sales, finance, and accounting orders, HR instantly right from your desktop or phone. That's why NetSuite is the world's number one cloud business system. And right now, NetSuite's offering you valuable insights with a free guide. It's called Seven Key Strategies to Grow Your Profits. You can get it at NetSuite.com slash Fool. That's NetSuite.com slash fool. Download your free guide, seven key strategies to grow your profits at NetSuite.com slash full. Let's get back to the news. 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 or sell stocks based solely on what you hear. Welcome back to Motley Fool Money, Chris Hill, here in studio with Jeff Fisher, Andy Cross and Ron Gross. Two new radio stations joining the Motley-Four money family this week. Welcome. WBLT and WGMN in Southwest Virginia. BLT?

Yeah. Yum. Sounds good. Shares of Adobe hitting a new high this week after second quarter sales rose 25% compared to a year ago. Jeff, I get that the end of 2018 was a little ugly for Adobe shareholders, but in general, this thing has just been a monster for five years or more. In the last three years alone, it has tripled. The stock has tripled. It still looks pretty reasonable. As you mentioned, Chris, sales are growing 25 percent year over year.

25 percent earnings per share growth is expected in 2020, and the shares traded about 30, 31 times that estimate. So a bit of a premium to the growth rate, but merited given the strength of the business. They're really dominating in digital experiences, creating content online, promoting your content online. And their creative cloud, which offers pretty much all of their products, or you can buy them piecemeal, really helps them sell both to enterprises, so they have giant corporate customers and individuals as well. So their customer base is so diverse, and It really makes for a strong business. This week, Facebook unveiled Libra, a new digital currency set to launch in early 2020.

Andy, this is not being run by Facebook directly. They're part of a group that's setting up a nonprofit association, although my assumption is, at some point, Facebook is hoping to make money off of this. Yeah, well, there's the foundation, Chris. I think what the real purpose of this is just to continue to grow the Facebook reach across their 2.7 billion monthly active users. I mean, there are 500 billion non-cash transactions made globally each year. So there's a lot of transactions made that Facebook doesn't really see.

And I think they spend so much time trying to build the social connection through Facebook and WhatsApp and Instagram that they now want to try to tie into the actual transactions connections part of our daily life. So it's a pretty exciting endeavor, but a lot of questions out there. How will work? It'll be backed by some of the big currencies like the U.S. dollar and the pound. and the Euro, but a lot of questions out about how it actually works and who actually uses it and how. How and why?

Yes. If you think about just the way that we will be transaction through currencies over the next 10 years, clearly moving more into a digital space is going to be the way of the future, and Facebook wants to get a piece of that. Darden Restaurants wrapped up its fiscal year, the parent company of Olive Garden, Longhorn Steakhouse, other restaurant chains. Darden, same store sales in the fourth quarter rose just one and a half percent. Ron, that is not lighting the world on fire. I think that's what the investors are focusing on, because it was a solid report overall,

driven by the addition of 39 net new restaurants. So sales were up 4.5 percent. But, as you say, 1.6 percent blended com store sales. So Olive Garden is getting it done. Longhorn's getting it done. Cheddar Scratch, not so much. Com sales down 3.2 percent there. and they had a few other concepts with negative comps as well. So they know where they need to focus on for sure. But still, overall, 27% increase in EPS from continuing operations is strong. Darden continues to execute really well. The stocks have been very strong over the last five years, up 15% this year.

They continue to purchase stock, raise their dividend, so shareholders should still be pretty happy. You and I were talking about this before the show. It's worth remembering that once upon a time, Starboard value, activist investors came in and got a lot of attention, in part because one of their recommendations for Darden was, hey, stop giving away so many breadsticks at Olive Garden. But while they got attention for that, you can look at the point where Starboard Value got involved in this company and draw a straight line to how well it has performed over the last few years.

And stop salting the water, so the pox lasts longer. For sure, they've executed well. Restaurants are not my favorite investment. Specialty retailers are not my favorite investment. You can't deny the success. Stock's even not that pricey right now at 18 times, where you see a lot of restaurants in the low 20, mid-20 range. So even now, it could still be a good investment. Normally, we go to our man behind the glass, Steve Broido, who's well known for many things, including being arguably the biggest fan of Olive Garden on the Eastern Seaboard.

Steve out this week, but our man behind the class, Dan Boyd, is here. He's going to hit you with a question because it's time to get the stocks on our radar. And Ron Gross, you're up first. What are you looking at this week? I've got Carter's CRI, leading manufacturer of children's clothing in the U.S. and Canada. Stock got smacked in May after a strong first four months of the year, traded down from a high of 108 to 84 on weak international sales, fear of tariffs. But it's rebounded nicely back to $95 a share, but I still think there's a nice entry point here. Dominant position in the children's apparel industry, strong financial performance across economic cycles, 2% dividend yield. only trading 14 times.

Dan Boyd, question about Carter's? Ron, I keep hearing that millennials are having fewer and fewer babies in the generations that came before them. How's that lookout for Carter's? Demographic shifts are important to the industry, for sure. They got to keep an eye on it and maybe start appealing to some older folks as well. Jeff Fisher, what are you looking at this week? Well, I've only taken a fresh look at this idea in the last few days.

So with that caveat, Papa John's Pizza as a short. So, betting against the stock potentially. The company is still really struggling since the founder was ousted from it last year, and they lost the NFL promotional deal. Sales have fallen 12 percent in the past year. Same store sales are down sharply. They're still trying to write the ship there. The former founder is selling his shares in giant boatloads at the same time.

But Chris, Starboard Value has stepped up. So look out. I've invested $250 million in the struggling company. It makes it for a very interesting, will it do poorly or will it recover type of situation? Dan, question about Papa John's? Not really. Jeff, my favorite pizza toppings are pineapple and jalapeno. Thoughts?

I don't know that pineapple should be on pizza. Yes, together. It's delicious. I've never tried that. Dan, I respect you, so I'll have to try it. Jeff, I know you're just taking a fresh look at Papa John's, but do you have to Are you aware that Shaquille O'Neal, one of the more beloved professional athletes of the last 30 years in America, is involved in this company?

You're also betting against Shaq. I am aware. It's not personal, and I haven't made the bet yet, but it's potential. That's good that it's not personal, because he's enormous, and you're not. Andy Cross, what are you looking at this week? I guess with Starboard coming on board, maybe we're not going to see breadsticks at Papa John. So I'm looking at fact-set research, Chris.

It's a company that provides global financial and economic information. company research, data, portfolio analysis, trading solutions, lots of different financial firms serve as more than 5,400 global institutions. It's $11.5 billion company, generates $1.4 billion in revenue, very profitable. Stock has almost doubled over the past three years, has returns on equity north of 50%. Operating margins are close to 30%. So client retention rates exceptionally high in 95%. So I'm looking to see if their subscription and revenue growth can continue to grow

above 5% this quarter. And the ticker? FDS. Dan? So generally it's Ron that brings in these very straight-laced, sort of buttoned-up, boring stocks. Did he get to you or something before the show today? That's not a question. He did not, Chris, or did not, Dan.

But when I'm looking more and more at these B-to-B business-to-business kind of provider, service providers, and facts, that's one of the best out there. You got a stock you want to add to your watch list, Dan? I love the Papa John's short because Papa John's pizza is vile. Wow. Ryan Gross, Jeff Fisher, Andy Cross. Guys, thanks for being here. Thanks, Chris.

Up next, a conversation with UpWorks CEO, Stefan Kostriel. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. At our recent Fool Fest Investing conference, one of our featured guests was Stefan Kostriel, the CEO of Upwork. If you're not familiar with the company, Upwork is the largest site when it comes to freelancing.

Motley Fool analyst Bill Mann interviewed Stefan Kostriel in front of a live online. audience with their conversation covering a range of topics, including the future of work, the state of freelancing, and some of the weirder jobs that have been posted on Upwork. Bill kicked things off by asking Stefan what he wanted to be when he grow up. Oh wow, it changed many times. I think I wanted to be a jet fighter pilot until I was 11 or so. And then my parents bought me, and you guys might remember what that was, an Atari 800. And I learned to code because that's the only thing you could do.

When you turn it on the machine, you had to code. And so I learned to code, and it was a life-changing moment. At the end, live in Silicon Valley. I grew up in Paris. Learning to code in Paris was not something that was cool or well-known. So I was probably one of the few kids. I sold my first computer program when I was 12. Made $75.

And I was like, I'm a millionaire. Like, I'm done here. Like, this is amazing. And, you know, then I became a computer scientist. All right. So why don't we start a little bit with Upwork? Sure. It's a $1.5 billion company.

It's focused on matching freelancers with jobs. What does this group of investors need to know about your company? Well, I think the main thing is that it's a really big market. We're solving a really, really big problem for the U.S. economy and for the world economy, more generally, and that we are at the beginning of a very long journey. As you said, we do about a billion and a half per year, meaning that's the amount money that freelancers on upwork, it also happens to be our market cap for no particularly correlated reason, I assume.

But freelancers in the US last year made $1.5 trillion, right? So we essentially have 0.1 market share in something that is growing much faster than the US economy. The number of freelancers in the US right now, it's about 35% of the US workforce, and is growing three times faster than the traditional, you know, full-time W2 population. And so we are at the very beginning of a very long journey where we're helping transform what people refer to as the future of work. I hope it's also the present of work because I have to sell it today.

I can't just wait for it to materialize. But the reality of it is there's a really big shift happening in society and in the economy. And it's happening in the U.S., but it's also happening across the world. We see it happening in India. We see it happening in Latin America. We definitely see it happening in Europe as well. So it's a newly public company. It came public in October of 2018.

Is that correct? Yep. Yeah, so... After 20 years, you know. Over night success. That's right. Yeah, it's been in business for about... You've been in business in...

Ninety-nine. So maybe talk a little bit about what that development path has looked like. Sure. So I am not the founder of the company. I was not there in 1999. I joined in 2012. But fundamentally, it's a company where the founders had an absolutely brilliant vision, but they were way too early compared to the market.

So if you come back in 1999, the idea that you could work online, and work from home, work remotely, meant you were doing this with expensive long-distance calling and fax machines. Not exactly great to build a relationship with your customers. The business started to take off when broadband became a big thing. Around 2008, broadband became ubiquitous.

People started to build video conferencing hardware, the first Logitec webcams, and then software that went with it. Skype essentially took off at that time. And that also became the time when tools that people use moved to the cloud. Things became digital in general. Things moved to the cloud. And so suddenly you could work from anywhere. And that's really been the beginning of the journey. So, you know, first 10 years were great vision, but smart enough not to burn too much cash because the market was not ready for us. And in the last 10 years has really been about exponential growth.

So I made a search on Upwork yesterday, you know, just in case this whole fool thing doesn't work out. So there were 12,000 jobs that were being offered. One was help me manage my Instagram feed. One was, I'm developing a plastic injection mold prototype, and one was requiring an incredible depth of programming knowledge. Your corporate description points to 5,000 skills in about 70 categories. What are some of the areas where you're having the most success? Yeah, I would say generally all things grow, and part of the reason why they grow is because companies that need X typically need Y. And so when a new customer, and I should be, mentioned that, by the way, the monthly four is a great client

and has been a great customer for many, many years. And we're deeply thankful for the partnership. But you would be an example. Like you started in one category, and then you started using us in many, many different ways. And so generally, all the categories tend to follow a similar path. That being said, we do a billion dollars

worth of software development every year. And the low of gravity does kick in at some point. There's only so many mobile apps and websites people want to build. Whereas in the smaller categories, you know, emerging trends in AI or things that are really, really nascent for us, like, you know, legal services or strategic consulting or what have you, where they start from a base of, you know, $50 million a year, let's say, grow much faster.

What's the weirdest job you've seen advertised? Oh, there's so many weird jobs. It's, you know, like, no, but it's amazing how, you know, probably one of the most interesting things about building a, you know, a middleware, like a tool that people can use is that they find ways to use it that are totally different from what we designed for them to do. Well, I would give you one example just because this is an investor community. One that I found surprising, but apparently it's very well known, is as part of taking the company public, we started talking to a lot of investors.

We've been cash flow positive for many years, so we haven't had to spend time with the investor community, up to preparing for the IPO. And as a result, I expected nobody to know us because we're not a consumer brand and we haven't raised money, so how would anybody know us? And during the IPO process, every single person we talked to was a customer. And that was shocking to me. So after a while, you start to ask questions, you know, like, what do you guys use us for? And it turns out that, you know, you can build all sorts of technologies on upwork to get an edge to try to understand, you know, like some of them are amazing.

You know, we power some of the predictive models, some of the AI for some of the best quant hedge funds in the world where they find amazing talent, you know, people that have three PhDs in neurolinguistics and live in Romania. and nobody else knows about them. They find them, they build like a quantum model that outbids everybody else in the industry. Some of it is less glamorous, but probably very effective, where they take satellite imagery and they count the number of cars in the parking lot of Walmart or they look at the shadow that is projected

by the shopping bags of people, and from there they infer how big the bag is, and from there how big the shopping cart was, and therefore whether Walmart is going to make down numbers or not. Wait, wait, wait, wait, wait. Yeah, no, they do that. There's actually, okay, so let me give you one. We are terrible at our jobs, so I don't know anything like that.

That's when you realize, like, you know, the wisdom of the crowd, right? When you've got like a billion people that want to invest in the stock market, everybody tries everything. There's a company that looks at satellite imagery, looks for oil tankers that are carrying oil, look at the size of the shadow of the tanker, and from there predicts how heavy the tanker is, and therefore how much oil.

So not only do they know where it's going, where it's coming from, but also how much oil is in there. And from there, they can build models that say, you know, this is what the oil price is going to look like. And so there's stuff like this, which is not at all what we intended for the product to be used, but clearly it's being used to, you know, make people, what's your expression, smarter, happier? I don't know about happier, but smarter and richer for sure.

I'm not sure how happy tracking oil tanker girth is, but, yeah. One of the things that you've said that I thought was so interesting is that, you know, in the gig economy that skills and not pedigree or what's going to matter for the future workforce. What does that mean for the future of education? I mean, there's a famous Broadway show called Avenue Q and they have a song called, what do I do with a BA in English?

So what do you do with a BA in English in a gig economy? Sure. You know, first of all, I would say, if you can afford to put your kids to college, especially a really good college, it's still very much valued by the industry. Right? I mean, there's still tons of companies that will say if you've got a PhD from Stanford or a BS from Yale or whatever you have, you will get a better job and you'll get paid more, right?

So I'm not claiming like you shouldn't put your kids to college. However, the reality is most children will not go to college, and that's true in the U.S. and it's true in the world. And in particular, children whose parents didn't go to college and can't afford to go to college, most likely will not go to college. And if you look at the economy today, the real wages of that population has been going down over the last. 50 years, and it seems like there's no end to this. And at the same time, you hear companies saying there's a huge shortage of skills, we can't hire good enough talent, and we also care deeply about diversity, we really struggle to find underrepresented minorities, all of that stuff.

And you realize, well, the solution is in the problem statement itself, right? If you keep putting in your job description, I need somebody who came to, you know, got a bachelor degree from an Ivy League university, and then you're wondering why you don't get underrepresented minorities, well, here's the answer. And so fundamentally, you know, a bachelor from Yale is a proxy for something else. You don't really care that they did a bachelor from Yale. You care that they learn how to learn. You care that they are very competitive.

You care that they are very analytical. I mean, whatever it is that you care about. And so we encourage companies to break down what they really mean by, you know, that bullet point, which looks in your curious, but is incredibly discriminatory in your job description. We've removed it. We don't put college degree required in our job descriptions. an increasing number of companies are doing it, and we find that it really helps us bring a lot of diversity,

and not just for the sake of diversity. I mean, obviously, we care deeply about diversity belonging and inclusion in our company, but it actually makes the company better. You bring people that have a totally different background, who, by the way, might look more like your customers. You know, like if you have a bunch of, not to be pejorative, but, you know, young white dudes who went to Stanford

and you're serving a much more diverse community of customers, well, maybe your employees are not relating, properly to the potential customers. So there's all sorts of good reasons. And I think it is going to be a better world, a world where people don't stop learning when they're 25, but they are learning throughout their lives, and they're learning in bite-sized chunks.

And so this approach of convincing employers to think a lot more about skills and convincing people to think a lot more about where they want to take their skills, what is the next set of skills they want to acquire, and invest in their rescuing. Either the companies need to help them invest, or people should set money aside.

to do it. In some countries, you know, Singapore, most notably is giving people $500 a year that they can only use in personal training. And as a result, the Singapore economy is extremely competitive from a talent standpoint because people always have the best possible skills. So you're having said that I promise you that I promise everyone that we didn't plan ahead of time because here my next question is lots of businesses use degrees, school eliteness and other educational achievements as proxies of competency. Yeah. What are some of the things that freelancers must do to stand out,

or is that something that the platform itself is helping them manage? Yeah, so I think, you know, what we do, like our role in helping freelancers is essentially two things. One is giving them access to jobs that they would never hear about otherwise. You know, typically in real, you know, offline freelancing world, people hear about jobs through their personal networks, and their personal networks tend to be deep. deeply local. So if you happen to live in San Francisco or New York, you get access to the

cold gigs. If you live, you know, 250 miles away in the center of the country, you have no idea what's going on, right? So giving people access to the diversity issue that you talk about it. Look, the main issue we have, you know, in this economy today, right, is we destroy jobs in the center of the country and we create jobs in a smaller and smaller number of cities, the superstar cities of the U.S., where the cost of living is rising even faster than the wages. And if you're a young person today, it's very much a catch-22, which is, you're a You either stay in your small college town,

and then it's going to be really hard for you to get access to really good jobs, or you move to the big cities, and now in addition to having unbearable student debt, you have an unbearable mortgage on top of that, right? And that is not a good place for us to go to, and it doesn't have to be that way. And so the number one thing that I tell employers is the way you do college recruiting today is fundamentally broken. Like the worst thing you can do is take a kid who's graduating from the State University of Fresno,

top 25. research university in the U.S., which is 200 miles away from San Francisco. The worst thing you can do is hire them and relocate them to San Francisco because you've made the San Francisco housing crisis and income inequality even higher. And meanwhile, you've depleted the city of Fresno from a highly talented person who was going to pay taxes locally and create jobs locally. And she could do that job just fine with Fresno. You know, frankly, like, the committing issue tends to be the same in every city.

And, you know, where I come from in Paris right now, there's all these, you know, strikes going on. And the issue is the people whose jobs really needs to be done in the town tend to be people that can't afford to live in the town. And meanwhile, the people that live in the town have jobs that can be done from anywhere. So the way we're building our cities right now is completely broken. But the good news is the solution is pretty clear, which is allow people that have knowledge jobs that can be done from anywhere to relocate to another part of the country where they're going to have a higher quality of life. They'll be closer to their community. And so we do the opposite of college recruiting.

We do what we call delocation packages. We have our people that are in San Francisco and the barrier, and we tell them, usually when they start to have multiple kids, they start to say, look, it's unbearable, I can't raise my kids here. It's not even healthy for my kids to live in this environment. We pay them to actually move to another part of the country, and they choose where they want to live. But don't they tend to move to Austin?

No, so typically, like, yeah, actually, that does happen. So I would say we are guilty. Guilty as Trump, and I would say Austin at this stage doesn't seem to be too resentful about it. The place that is resentful is Portland. Because we definitely have seen a lot of people that say, hey, I'm moving out of San Francisco, I'm going to Portland. And the Portland locals are saying the last thing we want is for our town to undergo the same thing that has happened to San Francisco in the last 20 years.

I mean, the best way for this to happen is to have a very decentralized and dispersed approach to it. If we're just porting the same problem, like we created Silicon Valley, the Silicon Valley situation, Then we created the Seattle situation, which is almost as bad. Last thing we want is to create the Portland situation thereafter. I mean, we need a place where cities invest in building livable places where people actually want to go. And in particular, young, educated people that tend to bring a lot of consumption and economic development with them.

We need more towns in the U.S. than are successful. Coming up, Stefan shares UpWork's biggest untapped opportunity. He also shares some great advice. for the graduating class of 2019. Stay right here. You're listening to Motley Fool Money. All right. Before we wrap up the interview, I want to say thanks to Sprout Social. What makes people love the brands they love? Connection. And social media is where they look for that connection. Sprout Social gives businesses a unified solution to find, engage with, and nurture their audiences through social. In one intuitive platform, you can see and respond to every message,

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Welcome back to Motley Fool Money. I'm Chris Hill. Let's get back to Bill Mann's conversation with Upwork CEO, Stefan Kossriel. What do you think are your company's largest opportunities going forward where you are currently not participating? Well, I would say, you know, probably the biggest one in the long run for us, and we are participating in it, but completely under index is working with very large employers. Traditionally our business was, you know, early stage tech companies in New York and San Francisco

that were struggling to find talent locally, and so we'd find people in the Midwest or people in Chile or somewhere else in the world. But reality is, you know, more than half of GDP and more than half of employment in the US comes from larger companies, who traditionally have been really reluctant to the idea of having people work remotely. famously IBM fired all of their remote workers and Yahoo brought everybody back in-house and all of that stuff. And unfortunately, they are also the slowest to change.

But it is a huge opportunity. We now work with 30% of the Fortune 500. Some of them will spend well over $10 million this year on the platform. It's still small compared to what it needs to be. But it is already 20% of our business. And I think if you ask me 10 years down the road, the vast majority of our business will be in the enterprise sector.

So you saw actually. with our last speaker what the last question is. Oh, yeah. So. Can we do this without the music? I can't imagine like doing it with the music. It's going to be even how there. Let's set the stage in your mind, though.

Let's say you're giving the commencement speech at a mildly prestigious university. Let's call it Duke. And 45 seconds, these people have already made four years of a mistake, but what have you got for them? Yeah. You know, like here's what I would say. They are, oh, we're doing the music.

I would say most carriers are linear and the good ones are exponential. And the way you start an exponential is by not doing what everybody else is doing. And so I would say three things that people should be doing. One is take more risks at the beginning. And I know it's hard because you have student debts. And I know you think it's the worst possible time to do it. It's actually the best possible time to do it because your opportunity cost will only go up.

And the amount of money that you owe to take care of your family will only go up. So take a big risk. Don't go do an entry-level job at a big company like everybody else. Second thing is learn exponentially. You know, what I said earlier, if you get 1% smarter every day, you'll be 35 times smarter at the end of the year. The time when you can make the biggest difference is early in your career. It's compound interest, just like investing. Invest in your skills. They will pay off over time in a big way. And I think the third one is do something that matters. You know, the world doesn't need another burger flipping automation. robot or another photo sharing app.

There's tons of issues in the world. There's tons of people that are struggling. So do something that is actually helping, you know, create a better world. And if you don't know where to go, I'd say the UN, the United Nations has something called the Sustainable Development Goals, and they're around gender parity,

they're around poverty, they're around food security, they're around climate change, go, you know, send a spaceship to the moon, do something big, do something that really matters because, you know, life is short, and you've got to get started now. You're going to get something now. Stefan Casriel.

That was amazing. Stefan Casriel, CEO of Upwork. Thank you. That's going to do it for this week's edition of Motley Fool Money. Our engineer is Dan Boyd. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening.

We'll see you next week.