Motley Fool Money - What Wage Growth Means for Stocks

Episode Date: September 7, 2018

Wages increase at their fastest pace since 2009. Five Below and Okta rack up big returns for shareholders. Tesla falls on news that its Chief Accounting Officer is leaving. And Mattel gets into the movie business. Andy Cross, Matt Argersinger and Ron Gross discuss those stories and share some stocks on their radar. Plus, Pulitzer Prize-winning journalist and best-selling author Charles Duhigg talks big tech, trade wars, and productivity tips. Thanks to LinkedIn for supporting The Motley Fool. Go to https://www.linkedin.com/fool and get $50 off your first job post.     Learn more about your ad choices. Visit megaphone.fm/adchoices

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Everybody needs money. That's why they call it money. The best thing they'll love. But you can do. From Fool Global Headquarters, this is Motley Fool Money Radio Show. It's the Motley Full Money Radio Show. I'm Chris Hill and joining me in studio, senior analyst Matt Argusinger, Andy Cross, and Ron Gross. Good to see you, as always, gentlemen. Thanks, Chris.

We've got the latest headlines from Wall Street. We'll talk with best-selling author Charles Duhigg. And as always, we'll give you the inside look at the stocks on our radar. But we begin this week with the Big Macro. The Monthly Jobs Report featured better than expected numbers, including the fact that wages increased at their fastest pace since June 2009, Maddie. Yeah, that's the headliner for me, Chris. Hourly earnings up 2.9%. We've been waiting for a while for wages to really start gaining momentum. And it looks like they finally are the highest growth in about nine years. Wages are a key determined for inflation. And this is why I think it's really important for investors. If you think about if businesses have to pay workers more, and that starts to typically happen in the later stages of an economic cycle, that means generally companies are going to offset that by raising the price of goods and services, which kind of spreads inflation throughout. the economy. And it has a lot of consequences, but one of the short-term consequences usually is that bond prices will sell off. Yields will rise. We're seeing that actually on Friday.

And it kind of sets a stage for more interest rates, raises from the Fed, which can lead to lower stock prices, at least in the short term. Yeah, that's what I was going to say. You saw the market trade down on this great news, right? There's always a counter to every silver lining. Nothing can just be good. So, right, Now everyone's worried, including our administration, I'm sure, about continuing tightening monetary policy. Interest rates will rise that could put a damper on stock prices. Interestingly, though, the job market is so strong that there are now more open jobs than there are people out of work looking for jobs.

Changing demographics, more retiring people, a declining birth rate is really setting us up for a problem to get to that U3, 4% GDP number without the proper workforce, I would have to say that's almost impossible. Yeah, the wage numbers, the growth is trending up, which I think, which is good because it's been so low for so long. It's still below the pre-recession pre-financial crisis days. So we're not anywhere near kind of back to where we maybe should be. But what's interesting, I think, from the investing side for me is in a marketplace of rising cost, and rising inflation, you really want to be a stock investor. You don't want to own bonds. I mean, that's not a place to really be. That's going to be a tough spot for bonds. As Maddie mentioned,

yields are going to go up. That negatively affects bond prices. And you want to particularly own companies that have pricing power, the ability to handle these price increases because they are coming. Inflation is creeping up. So the ability for companies to manage the price increases for one of their highest cost inputs to their product is going to be really important for investors. But stocks are the way to go in that market. Yeah, I mean, I want to end this on good news because I do think, to Ron's point, Andy's point. But it is nice to see workers actually have choice now in this economy. In other words, I think for a long time, workers were kind of feeling like they had to stay with their organization.

They didn't take vacation. They didn't look for other jobs because the economy was still relatively shaky. But it's stronger today that workers are actually going out there and, finding jobs and having some bargaining power. Another interesting week for Tesla shareholders. On Thursday night, CEO Elon Musk went on comedian Joe Rogan's popular podcast for a two-and-a-half-hour interview. It was streamed live on YouTube where viewers could see Musk at one point, smoking marijuana.

On Friday morning, Chief Accounting Officer Dave Morton announced his resignation less than one month after he started shares of Tesla down 11 percent this week. Is one of those two things worse than the other? Well, I think the headlines are coming from Elon on the podcast and holding a flame throw, I saw a picture of doing that and smoking maybe alleged marijuana and drinking some whiskey. But for me, just continuing to see some of the executive turnover, we also saw the head of human resources

who will not be returning after a leave of absence. Dave Morton, who joined one day before Elon made his famous tweet. Funding secured. Funding secure with a price of $420 for a Tesla buyout. So I think just the public scrutiny of a company like this is just so much higher than what he realized. They said in the press police, it has nothing to do with the leadership or the financial accounting, which is good to hear. And I take him at his word.

And so I think from the fact that we are seeing these executives at a very high level have continued to have rapid turnover at Tesla for shareholders is something we have to continue to watch. Yeah, I guess I just wonder where the line was crossed here. We look at a lot of these CEOs, and we ascribe the words brilliant, innovative, maybe a little eccentric. But at some point, I just feel like Musk-Mai stepped over the line into a little bit of crazy. Up the rails? Yes, I'm looking for the right adjective here.

I just, and I worry just about the few. It's already, we know how difficult it is to run a car business. I know Tesla has a lot of irons out there and other fires, but it's, this is a tough business. And I think Elon's making it extra hard on himself and his company by doing some very weird things in the public. And it's causing a lot of turnover at his company. Yeah, and when it rains at poor, it's with Andrew Left of Citron Research following a lawsuit against Tesla and Musk for violating federal securities laws when he did announce that funding was secured for a take private transaction. Normally, I would take Citron with a little bit of grain of salt. They often are notorious short sellers.

They talk up their own book quite a bit. But I think maybe he has a point here because that does, on the face of it, appear to me as a federal security law violation. Yeah, I'm not sure that Musk is helping shareholders. But as someone who hosts a business news show, I certainly appreciate it. You know, something we have, it's almost like every week you could probably talk about Tesla, at least recently. We have talked about this. Investors in Tesla, you have to understand with some of the you are buying into Elon and into his vision. So you have to understand. We are seeing a little bit more of the eccentricities of him coming out.

But investors in Tesla are buying Elon Musk. Last week in Minneapolis, JD.com founder and CEO Richard Liu was arrested after an allegation of rape. He was later released and is back in China. The company has said Liu is willing to cooperate with authorities further, if asked. Matt, this is an interesting story on several levels. But what I'm struck by is the conflicting reports we're getting both from U.S. media and from the media in China. And as of this taping right now, the investigation is still ongoing. It's still ongoing, and I think it's something that the allegations have to be taken very seriously.

I think, as Andy just pointed out about Tesla, I think an investment in JD.com is very much an investment in CEO and founder Richard Liu. He's the founder. He built the business basically from a small electronics store 20 years ago. He's built it into the largest direct-consumer retailer in China. He's a billionaire. He's also somewhat of a celebrity figure. And he owns 16 percent of the stock, but also controls 80 percent of JD.

comm's voting power to the point where the board of directors of JD really can't make decisions without Richard Liu involved. And so these allegations are serious. We don't know the facts. It sounds from what JD has said is that there aren't any charges coming. If that is the case and that does prove out, the stock is likely going to rally because it's been hit pretty hard after this news. But we'll have to see, and I worry if there's even a sliver of credibility to the allegations,

it's not just JD's reputation or Richard Lou's reputation. you have companies like Alphabet, Walmart, Tencent, who have taken major stakes in this business, and have partnered with JD.com, and on a number of term initiatives, they're definitely not going to stake their reputation on what happens with JD.com. Well, and on top of all that, he doesn't really have a second in command, does he? No, he doesn't. Coming up, we've got a few stocks on our radar and a few suggestions for Hollywood's newest film studio. Stay right here. You're listening to Motley Fool Money.

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That's 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 yourself stocks based solely on what you hear. Welcome back to Motley Full Money, Chris Hill, here in studio with Andy Cross, Matt Argusinger, and Ron Gross. Octa, the cloud security tech company, is not profitable, and Wall Street doesn't seem to mind at all.

Shares of Octa up more than 20% on Friday after second quarter revenue came in higher than expected. No earnings, Andy, but the revenue was going in the right direction. Yeah, when you're right, Chris, when you're growing 50% on the billing subscriptions and 57% on the revenue line, I mean, ACTA continues to show why this company that provides software solutions for companies and for enterprises to help them manage their employee login credentials and security credentials continues to win. The fact that stood out for me, Chris, was the fact that clients that generate more than $100,000 in annual recurring revenue was up more than 55% this quarter. That was a record. So they continue to show why they are more meaningful, why this

interest of security management, simple log-ins, scalable solutions, continues to really resonate with the clients that are serving, clients like 20th century Fox, Cisco, Allergan, The Motley Fool, right, Ron? So their retention rates continue to be north of 120% on a dollar basis. So their head count was up only 27% when revenues are up more than 50%. So continuing good news coming out of Octon and showing the stock price that it was up about 20% today. Shares of discount retailer 5 below up 15% on Friday after second quarter profits came in higher than expected. And Ron, same store sales look pretty good too. It's a firing on all cylinders moment. This company is really getting it done.

Stocks up 95% year to date on incredible growth numbers. Sales of 23%. As you say, Comstells up 2.7%. We saw a great operating income increase of almost 16%. And then when you layer on the tax benefits that all companies are benefiting from, you have a 50% increase in earnings per share. So really incredible numbers. Now, do you want to pay 53 times for a discount retailer when you can buy Dollar General or Dollar Tree at 14 or 15 times? Well, maybe you do because these guys are growing much, much faster than those. and there's pretty long runway of growth ahead with only 700 stores, and they think they can get to 2,500. Are the stores concentrated in any particular part of the country?

They're in 33 states now and expanding. California has probably the most off the top of my head, but they're slowly getting into more and more states. This week, Mattel announced it is launching its own movie studio, Mattel films, among the toys that Mattel can leverage from its portfolio. We've got Barbie, Hot Wheels, Monsters, High, Thomas and Friends, as well as other brands, Maddie, that I really have a hard time imagining on the big screen.

Yes, that's right. But there's some good ones in there. I mean, I personally was a big Hot Wheels fan growing up. I mean, I had so many. I was one of those kids that had a chest. Oh, I had a little suitcase with the slots. I mean, the chest was like 50% Legos and 50% Hot Wheels. And so, you know, I think it's totally, maybe like a sequel to Cars, but not really cars.

It would be its own thing. But I think that'd be pretty cool. So first movie out of the gate, if you're running the movie studio, is a Hot Wheels theme. wheels, right, especially if there's an all-electric, you know, maybe model less in that... Andy, what about you? Well, I think the most successful one would be Minecraft, but the one that I would want to see is rock'em-sockham robots. I don't know how they would make it, but I just think the rock-um-sockom, you know, just take like, you know, the rock maybe versus some other wrestler

and turn that into a whole movie franchise, Rockam-Socom robots. Ron? Now, the correct answer is Masters of the Universe with He-Man and Skeletor. Now, I'm not naive or ignorant. I know that this was attempted in 1987 with Dolph Lundgren as the star, and it was a disaster. I liked it. I was seven years old. In the right hands, you have a

he-man franchise on your hands. Come on. We have to go to our man behind the glass. Steve Brodow. Steve, I'm guessing you might have a thought or two on what the first movie out of the gate should be for Mattel films. I do indeed. American Girls' 2018 Girl of the Year meet Luciana Vega, a creative, confident,

11-year-old girl, and aspiring astronaut who dreams of being the first person to go to Mars. I read that directly from Mattel's website. That is the first movie you can bet on. Wow. I mean, American Girl, they got a lot of options there in terms of backstory and that sort of thing. All right. Let's get to the stocks on our radar. Our man behind the glass is going to hit you with a question. Ron, you're up first. What are you looking at this week? I got CME Group, ticker CME, operates the world's largest futures and options

exchange. They're in a great position to either innovate or acquire assets to grow. They take a little toll for every transaction that goes across their platform. Institutions managing risk. Derivatives are more important than ever, which is good for their business. They pay a 3.6% yield, including a special dividend that they typically pay on an annual basis. And trading volumes are skyrocketing, so the business is strong. Steve, question about CME group? Your biggest options fail, whale, and your biggest win, Ron. Wow. I haven't traded options at a long time, but I have in the old days read options all the way to zero and lost a ton of money on some healthcare stocks. And then I believe back in the day, I made my most money on PepsiCo call options. Andy Cross, what are you looking at this week? I like Adobe reports earnings next week. The stock's been on fire. It's up almost 50 percent this year. The maker of software solutions for really creative types and writers, artists, illustrators, photographers, makers.

They make Photoshop and Acrobat Illustrator. They're really doing really well across all their businesses, especially as they've pushed aggressively to the cloud. It's been a massive win for them. So I want to see if they can continue to grow all of their businesses north of 20 percent or at least close to it. And the ticker symbol? ADBE, Adobe.

Steve, question about Adobe? Who's their biggest competitor currently? I guess you think about different software providers that they may have. You can compete against the big ones. You know, Google and the likes. But as far as owning that space, when you think about who they are serving with their creators, there's not very many of them. They didn't a really good job locking up that space. Matt Argusinger, what are you looking at?

I'm going with not a stock, but an ETF. This is the I-Share's MSC-I-China-E-F. Ron, ticker MCIH-I. So we talked about JD.com earlier in the show, and I know there's some very specific problems for that company. But really, across the board, Chinese stocks have just been clobbered. And if you look at the Chinese, the main Chinese stock indexes like the Shanghai and the Shenzhen, they're down more than 25%. Definitely in a bare market. So I like this ETF. It's a simple way, I think, to play a rebound in China. And you've got Tencent, Alibaba, and Baidu actually make up 30% of the ETF, which is high. But I look at all three of those companies. And I think they're very cheap, given the growth in the platform. But you also have the rest of the 70% is nicely diversified across

China, so an easy, diversified way to kind of play a rebound in China. MCHI, Steve. So when I look at ETFs, how many stocks need to be in a basket that is an ETF, roughly? It really varies, Steve. You can have an ETF that can have as little as 15 stocks in it, or some ETFs out of hundreds. I think once you get to 15 or 20, you're pretty well diversified, and that should be just fine for investing in a basket. Steve, three tickers. You've got one you want to add to your watch list? So we use a ton of Adobe products here, so I'm a shareholder as well. I go with Adobe.

By the way, am I the only one who thinks that if the first Mattel movie is based on American Girl? Steve gets an associate producer credit on that, doesn't he? Has to. Right. All right. Thank you. Ron Gross, Andy Cross, Matt Argusinger, guys. Thanks for being here. Thanks, Chris. Hey, Steve, one more thing before

we get to the break. Yes. So, you've got young boys, yes? I do. One of whom turns for today. Really? Yes, his fourth birthday. Happy birthday. Happy birthday to George. Shout out to your man. That's great. He's a regular listener of this show. Absolutely. Every week. He tunes into this every week. This in fresh air.

You know what? We do have some young listeners. I've gotten videos from emailed to radio at fool.com from people who have shown off their young kids actually listening to Motley Fool Money. So I'm not saying George is necessarily the most dedicated listener, but they're out there. He's in the pond. He's in the pond. Here's my question. Thomas and Friends, are your boys into that at all? Not so much. We like Team Moomy Zumi. We like, let's see, we watch a lot of Odd Squad, which is a PBS show. Those are team favorites among the Broido clan.

Okay, you know what? You're good. You're not missing anything. Because Thomas and Friends, as I look back on the time when my son watch it, kind of a creepy show. The best thing about it was the stretch of time where George Carlin was the narrator here in the United States. I don't remember that. It was great. Wasn't Ringo Starr part of that? I have Ringo Starr in my head with that. He was involved. Alec Bob was involved. It's really just, the actual tank engines that were the problem.

Gotcha. It was Thomas. It was Thomas. Okay. So hopefully that's not going to be their first movie. Drop us an email, Radio at Fool.com. If you've got suggestions for Mattel's first toy movie, we'd love to hear it, and we will pass it on. Also, if you've got questions about the stocks that are on your radar or in your portfolio,

you can ask those two. Radio at Fool.com. Earlier this week, Twitter's CEO, Jack Dorsey, and Facebook's chief operating officer, Cheryl Sandberg testified on Capitol Hill. Charles Duhigg is a Pulitzer Prize winning journalist with a few thoughts on how Silicon Valley executives are wrestling with data security, privacy, and so much more. Stay right here. This is Motley Full Money. Welcome back to Motley Fool Money. I'm Chris Hill. Charles Duhigg is a Pulitzer Prize winning reporter and a bestselling author, and he joins me now from New York City.

Charles, welcome back. Thanks for having me on. We're recording this on Wednesday afternoon. It's important I timestamp this because who knows where this first story will be. we talk about is going to go. The big story that's happening right now is on Capitol Hill. Twitter CEO, Jack Dorsey, Facebook chief operating officer, Cheryl Sandberg, testifying before the Senate Intelligence Committee. And all of this is dealing with fake accounts, the integrity of our electoral process. We had Cheryl Sandberg talking about how Facebook is hiring more people to

review content and investing more in artificial intelligence to spot fake accounts. Jack Dorsey talked about promising a thorough review of the way Twitter works, and both of them saying, yes, we're investing resources, we're working on this. As you watch this story play out, what jumps out to you when you look at how Facebook and Twitter are trying to navigate this very tricky situation with outside interference? Well, the biggest thing, there's a couple of things that jump out at me. The first of which is, this is actually a really hard problem to solve, right? Think back to when Mark Zuckerberg appeared before Congress. And it actually seemed like there was a little bit of a combat between Zuckerberg and our legislators, our lawmakers. And what's different now is that everyone is kind of on the same side of the table because everyone's kind of realized this isn't a situation where Silicon Valley and Washington, D.C. have a difference of opinion. It's a situation where everyone kind of agrees that some type of reform is needed, but actually achieving that reform is really, really hard.

That's the first thing that jumps out of me. Now, the next two are actually just as important. The second one is that you heard senators say, we need to regulate social media, and probably, frankly, the internet platforms more broadly. And you heard Jack Dorsey and Cheryl Sandberg say, we agree. Right? Everyone is now on board to come up with. some new type of regulations for what's going on online.

And the third thing, and this is the most important thing in some ways, is what you didn't see. You didn't see anyone from Google, right? They had gone out and they invited Larry Page. They invited the CEO of Google to come and join them, and they turned down the invitation. And there's a really interesting question as to why Google felt like that was the right thing to do, because what we are seeing is we're seeing a very different strategy

emerge among some of the top largest internet companies about how they're going to deal and respond to the inevitable regulation that is now coming down the pike. It's interesting that when you mentioned Google and their executives utterly passing on this opportunity because it's some senators saying that they were arrogant. Just as an investor, I looked at it and I thought it was kind of weak because for whatever you think of executive X who leads company Y, you have to respect when they show up and they face the fire. And the fact that they didn't makes me think ever so slightly less of Google's leadership. Oh, no, absolutely. And there's a case to be made that greater regulation, what's going on right now, will actually benefit the incumbents, right?

Who has the most money to be able to deal with regulations and be able to enforce them? The giants. Some startup walking into a regulated environment is going to have an even tougher time. If that is, the giants are involved in writing those regulations. Right now, we have Facebook and we have Twitter at the table. And Google is nowhere to be found. Well, and also with Google, we had President Trump recently complaining about Google and whether or not their news algorithm is being fair,

it seems like they may have caused themselves more harm than good with this move. When you combine that with Trump's recent complaints. I absolutely agree. I mean, look, at the end of the day, the economy is now the Internet economy, right? Every company is an Internet company. And these are either the robber barons or these are the monopolists or these are the guiding lights who are showing us the path to the future. regardless of which one you believe they are, they should be involved in the most important

conversations. And when you don't show up for a meeting with the top legislators, top lawmakers in the nation and probably the world, for that matter, you got to wonder why, why not just send someone to sit at the table and participate in the conversation? I want to go back to the conversation you and I had back in April because one of the things we talked about was an article you'd written. Part of the article was about the antitrust case against Microsoft roughly 20 years ago. And I want to get to two parts of that as they relate to the events that are unfolding right now. One is you and I talked about the distraction factor

from Microsoft, how Microsoft spent so much time dealing with the antitrust suit that the government had brought against it, that they kind of took their eye off the ball, in other areas of the business. In terms of Facebook, Twitter, and definitely Google, do you think that even though in the case of Facebook and Twitter, they have a seat at the table, does this distract them to a degree that potentially harms their business over the next few years?

It's a really hard question, and I think a really good one. I think you're asking exactly the right one, particularly for investors as they're trying to think through, right? The problem is that we're living in this time where things are changing so quickly and news, I mean, there's like three or four news cycles a day. The things that we do know is that an economic downturn is coming, right? Could be a slowdown, could be a recession.

Nobody knows for certain how it's going to manifest when it's going to start, but we know that it's coming. This has been the longest bull market in history, and that has some consequences. And then on top of that, there's all this uncertainty in the world, right? There's uncertainty around politics. There's uncertainty around the White House. There's uncertainty around trade. And so then the question becomes, for these companies,

that have a really entrenched position, what ought they to be investing in next? Where is the competitive threat going to come from? Because it's not going to be search, and it's not going to be social media. It's going to be something new. Now, historically, what tech companies have done is they've made a bunch of different little bets, and they've used that sort of covering the board with those bets to try and make sure that they're ahead of the game whenever the next thing emerges. And your question is exactly the right one, because if one of the bets that they're making is on regulation? Can they keep that bet small enough as part of their mind share that they can pay attention to what's going on in the rest of the economy and in the rest of the marketplace? I think we're just

going to have to wait and see. It's not just regulation that should make us worried right now. It's the fact that there's so much uncertainty around so many different things. If you're Google or your Facebook, what are you thinking about overseas trade and currency risk right now? What are you thinking about what's going to happen with the midterm elections? There's so much uncertainty. The one thing that we know is that uncertainty is not great for steady-as-you-go investors, right? And these companies are steady-as-you-go investors at this point. But also uncertainty creates great opportunities for fast and nimble companies. And the question is, are these giants fast and nimble anymore?

Another thing we talked about this spring was you had written about how the antitrust lawsuits can be an important part of the innovation cycle. when you think about the distraction factor for Google, Facebook, Twitter. Is there someone out there that you think benefits from sort of the greater scrutiny, particularly when it comes to those three companies? Absolutely. And the thing is, I don't know their name, and I don't think any of us do. There's some small company out there, a handful of small companies, who, if there weren't these big giants, they would have blossomed already.

And they're waiting. And maybe they're in, you know, alternate, the AR, maybe they're in virtual reality. Maybe they're in online banking. Maybe they're in some device that we haven't even really thought of yet. Maybe it's Elon Musk and he's going to send someone to Mars just as soon. Probably not that one. But the point being that there is a whole fertile economy out there of companies that we have not heard of yet that are afraid to pop their head up too high.

Because if you can't go from zero to unicorn in two years, you're going to get smashed by the marketplace. And as soon as something shifts, as soon as there's some volatility that lets someone through the cracks, we're going to start seeing those new companies. And it's going to be exciting. We're also going to see a lot of disaster. But that's kind of how economic, that is the creative destruction of capitalism. You mentioned trade. It reminded me of another thing we talked about in April, which was trade wars. And at the time you had said that not much it happened with regards to the trade war.

That was back in April. Where do you see things now that we're in September? They're not great. So if everyone remembers back to their econ 101 classes, G, growth, right? The health of our economy is always dependent on its biggest variable, which is demand. And anytime you have a trade war, you tend to dampen demand. in a very unproductive way. You're basically saying, in one marketplace, we're going to sell less of our stuff, and we're going to buy less of their stuff, for no bigger end. Now, trade wars have

their place when you're trying to settle a political dispute. It's not clear right now, however, what the political dispute is. That's one of the challenging things around this trade war, is that we're not unified as a country or as lawmakers around what we hope to accomplish through trade wars. And they're getting bad. We haven't seen a lot of the negative effects yet because the U.S. economy is still the strongest in the world. But when we see this inevitable downturn occur, a trade war is the type of thing that can accelerate the impacts of that, multiply its consequences. And I think that's what most people that I talk to are worried about right now. Coming up, we'll talk Apple and Charles will share a few productivity tips. Stay right here.

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So if you're not using LinkedIn for your hiring needs, you're probably missing out. Hurry to LinkedIn.com slash fool for $50 off your first job post. That's LinkedIn.com slash fool. Terms and conditions apply. Welcome back to Motley Fool Money. Chris Hill talking with bestselling author, Charles Duhigg. Next week, Apple is having an event to unveil the latest and greatest versions of the iPhone and presumably other devices.

Back in 2013, you won a Pulitzer Prize for the New York Times series that you did on Apple and the working conditions at the Foxcon factory in China. And I'm curious if in the end of the Internet. intervening years, you're at all surprised at the success Apple has maintained. Because I think back to that point in time and the stories that you wrote. And I remember people going on financial television and saying, this isn't going to put Apple out of business. But in terms of Apple's stock, the heyday is over. And in hindsight, we can look back and say, that actually would have been a really great time to buy. Oh, absolutely. Right. Like what you clearly should have done is bought whatever stock

the New York Times is beating up on that week because you would have made a billion. No, it's a really good question. Like, what has happened? And I think there's two answers to it. The first is a failure, a lack of substitutes, perfect substitutes, has failed to emerge in the marketplace. If you remember back before the latest Nike controversy, right, the one that we're living through right now, if you think back to it that those times when there were all those articles about Nike making shoes in sweatshops overseas, You saw a bunch of people move away from buying Nike, but that's because there were perfect

substitutes. You could go buy a pair of Adidas or a pair of Reeboks, and then they were basically just as good. The same thing was true of genes. If you remember, there was a period when guest genes was under attack. What's interesting is that in the case of Apple, they have, the iPhone kind of stands alone as its own product. There are other products out there that compete with it, but none of them offer quite the compelling or quite the expensive package that the iPhone does.

And one of the things that Apple has done really well is that they've consistently stayed ahead of the curve. They've allowed themselves to never have a perfect substitute. So it's harder for people to switch from one brand to another. But the second thing is, if you'll remember a lot of what we were writing about were working conditions in Chinese factories. They were conditions inside Apple's retail stores where American workers weren't getting very high wages. Apple has changed a lot. on the working conditions in Chinese factories, they almost completely reformed how Foxcon paid its employees and how many hours they could work, setting off one of the greatest sort of

wealth explosions in the last decade in China. And in addition, Apple has made a lot of other reforms. They're very sensitive to criticism and try and listen to it and respond to it in ways that other companies can become defensive about. And as a result, you know, I think what people think about Apple is a good company, and they're largely right. When Apple finds out that it's doing something that's not great, it tries to reform it. In addition, there are some things that Apple still does that aren't great. They don't pay as much in taxes, almost no tech company does as many of their peers in the offline world. But in the current climate where we're talking about so many other things in Washington, D.C., than corporate tax policy, that's less of an important issue right now.

And Apple does a really, really good job of living by its values and trying to embody them and to try and make sure those are the right values. And that pays off. You've written two books, The Power of Habit and Smarter, Faster, Better. As we wrap up, I'd love if you could just share one takeaway from each book, something actionable that you learned while you were working on the book and have applied to your own life. And we'll start with the power of habit. Absolutely. So in the power of habit, it's actually kind of the same basic theme for both the power of habit and smarter, faster, better, which is I'm just much more deliberate now about trying to develop these routines, these daily routines that allow me to think more deeply. So take, for instance, writing a to-do list. Like, you know, I have a list here on my desk. I'm on my desk in Brooklyn right now. And I have a list of my desk of like 30 different things that I want to get done. But that's not my to-do list.

Every night what I do is I sit down with an index card and I write down three things that I want to do the next day. My most important thing, the second thing I want to get done if I do that most important thing, and if for some crazy reason, and this never happens, I get both of those two things done, what I'm going to do next? And the reason why I do that is because if I look at that list of 30 things, I'm going to find the easiest one. Like I'm going to find the funnest one. I'm going to make that reservation to Costa Rica in January or do something else that looks like, like it'll be satisfying just to check it off my to-do list. But if I only have three things on a list and I force myself to write down the three most important things, then I actually get

done the things that matter most. And so for the power of habit, what I've really done is I've built these like daily habits that force me to think about, to think more deeply about the choices I'm making, to try and be productive instead of just busy. And then because we know that we tend to do those things that we get rewards for, our brain makes it into a habit, I reward myself. So like if I get the first thing on my three things, my three item to do list done, I go and I like have an ice cream cone or I take a walk around the block. I call my wife and I like, you know, harass her, make her talk to me for 20 minutes. I do something to reward myself because I know that if I have those rewards in my life, it's going to get easier and easier and easier to do the

harder things. And for smarter, faster, better? For smarter, faster, better, a lot of it actually is about giving myself time to think. So every morning when I wake up, instead of like grabbing my iPad in my bed and trying, like reading my emails, I actually have an app that I set it in times for two minutes. I just sit there and I try and visualize my day. I try and figure out like, what is the most important thing I can get done today? That's usually number one of my three item to do list. But number two, like, what does a successful day look like before lunch? Like, what are the things that, like, can throw off my entire day?

Why did I fail yesterday at getting all three things done? What should I do differently today? I mean, the thing is that, like, life is so busy right now, right? And I've got two kids. I know many of the people listening have kids. You can literally fill every minute of every day being busy, even just replying to emails. spending time with your children, just trying to, like, digest all the news that's out there.

Business is the enemy of productivity. So I have built these little windows into my day that force me to think more deeply about the choices that I'm making. The other thing I do, and this is really important, is that when I get home every night, or when I call my wife and harass her on the phone, I tell my wife what I did that day. I tell her, like, hour by hour what I did that day. And it is supremely boring for her. She does not want to hear about my day, but I'm not doing it for her. I'm doing it for me.

I'm doing it to force me to talk about and think about what I got done that day and what I didn't get done and why. The more I verbalize and express what I hope to do and why I failed at doing that, the more I force myself to think either quietly or out loud about the choices I'm making, the more successful I'm going to be. And thinking is hard. We all want to avoid it if we can. But if you force yourself to do it, that's study after study shows.

That's where success comes from. His first book is The Power of Habit. His second book is smarter, faster, better, and I'm pretty sure his third book is going to have something to do with marriage. Charles Duhigg. Always good to talk to you, my friend. Thanks for having me on.

Hey, thanks for listening this week. If you enjoyed the show, help us out tell a friend tell them about motley full money and all of the podcasts we've got here at the motley full that's going to do it for this week's edition of motley full money our engineer is steve broido our producer is mac greer i'm chris hill thanks for listening we'll see you next week