We Study Billionaires - The Investor’s Podcast Network - TIP385: Breaking the Rules w/ David Gardner

Starting point is 00:00:00 You're listening to TIP. On today's episode, I sit down with David Gardner. David is an accomplished investor, author, and entrepreneur who co-founded the well-known financial advisory company, The Motley Fool. In this episode, we cover how to identify rule-breaking companies, why optionality is a great indicator of a company's future success, David's 25-point system for identifying risk, what is conscious capitalism, and why it should become a focus for your portfolio, and so much more. David's optimism and passion is palpable and contagious, and I know this episode will get you

Starting point is 00:00:34 fired up in the best way. So, without further ado, please enjoy this refreshing take on investing with David Gardner. You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Welcome to the Investors Podcast. I'm your host, Trey Lockerbie, and we have a real special treat for you guys today. We have on the show with us, David Gardner. Welcome to the show, David. Thank you, Trey. It's great to be with you. I don't know why it's a real special treat, but let's try to make it special together. Well, it's a special treat because I wouldn't say I'm intimidated, but it's not often I find someone who is not only a great investor, but a great business fan and also a great podcaster. So I've really got my work cut up for me today. Yeah, right. You're actually a professional. I'm just an amateur, just trying to make it work from one week to the next with my podcast, which I've loved doing. But you know, that word amateur, which as you may know, I remember this still from my undergraduate. That's the only degree I ever got, just an undergrad English degree. But it comes from the Latin for love. And it's, you know, what do we love doing? And so I really am an amateur when it comes to investing and business and podcasting too. And so I think it's really important to have that amateur mentality.

Starting point is 00:02:03 and keep it in play your whole life. I have to agree. I think as soon as you slap the expert label on something, you're done growing, I think, right? I love it. Well, you haven't approached investing from, I would say, the traditional path, but you've found this niche for yourself, this own style, your own authentic style that's worked really well for you and worked for a lot of followers of the Motley Fool. I would say the core tenet of it is around this idea of rule-breaking companies.

Starting point is 00:02:30 and you seem to be going against consensus as a means of finding potential competitive advantages. So before we get into rule-breaking businesses, I'm curious where your contrarian nature comes from. And if you think contrarianism is a learned skill. I'm generally somebody who tries to think that almost anything can be a learned skill. So I'm not going to say it's not. But I do think it's more of a viewpoint, an angle. and that's not necessarily a learned thing. It's more something that you either start with or kind of roll into.

Starting point is 00:03:05 You can choose it intentionally, choose to call yourself a fool, for example. But I do think some people are just naturally funnier, they're comedians than others. I'm not sure how much comedy is a learned skill. So this one's probably closer to comedy than not in the sense that I guess I just grew up, when everybody took one side, I just could not help but take the other. And in particular, I think of like, What are examples from my youth? Well, I was a huge baseball fan and I was a big Bill James fan. And back from the day, and I'm talking about the 1980s now, these days Bill James and his ideas

Starting point is 00:03:36 have been mass adopted. Baseball can be done smarter, better, using numbers more effectively. That was written in a book called Moneyball by Michael Lewis turned into a great movie with Brad Pitt playing the lead. But the heart of it, Bill James came from outside the industry and he challenge the conventional wisdom that baseball people, that's with capital B, capital P, had been operating off of for decades. Things like, you know what? If it's a tie game, seventh inning, you get a run around first, you're going to bunt. You got to move that runner forward to second base. And if you didn't do that as a manager, you'd be asked by the media after the game, why didn't you bunt? Because that's what the book says. That's what everybody does.

Starting point is 00:04:17 And so Bill James comes from outside of baseball, and he basically questions that conventional Wisdom, uses a black box in this new digital internet era that we live in, used computers to gather data, and discover it's actually a dumb move to bunt the guy from first to second. It sounds smart and a little bit conservative, but it actually results in fewer runs net net when you run the numbers. So I loved that. And yet James himself was not treated, wind and dined by baseball people back in the day. He was shunned.

Starting point is 00:04:47 You never played the game. You're just a journalist, et cetera. So I can think of examples like really geeky examples in my life like that. Like for example, Lord of the Rings, Lord of the Rings was so geeky. And then all of a sudden it became a multi-billion dollar sensation and wins all the Academy's awards for its last movie. So I've watched things that looked like they were not mainstream. Video games, another great example, our whole lives long, really.

Starting point is 00:05:10 Well, I'm older than you, Trace. I'll say my whole life long because my first computer game was Pong. And truly, it was like being demeaned as a new medium. kids are wasting their time. It's addictive and bad. And it's ended up being amazing, I think, interactive entertainment. And it's bigger than Hollywood today. So I've watched things that were outside the norm, challenge the norm. And when they win, they win spectacularly. So I'm wrong a lot too. And we're going to talk about that, I hope, in this hour together. But that's my overall feeling is that if you have that natural angler viewpoint that you just want to challenge,

Starting point is 00:05:44 You want to play devil's advocate to your industry or to the world. It can really help you unlock new approaches. And I've seen it in entertainment, sports, et cetera. And just to come full circle on that, then, the biggest conventional wisdom that I think I was raised with, but actually, fortunately, against by a dad who didn't agree with it, is that you and I can't beat the market as investors. We should just index everything. I call that big, dumb money.

Starting point is 00:06:10 We're in an age of big dumb money because everybody's just kind of indexing them. the big money sloshing around willy-nilly going to all the good companies and all the bad companies, all the also rans and all the leaders, and we're told by academia as a powerful force in this area that that's the right thing to do because you couldn't really know which one would actually do better than the others. That would just be luck. Monkeys throwing darts. And I totally disagree with that. And so that's another great example of, you know, I was raised with this idea that we should buy stocks by a dad who never bought a fund. And so these are really, all examples from my youth of things that I observed from a different viewpoint and then

Starting point is 00:06:48 challenging that wisdom. And then when you're right, by the way, you're not always, when you're right, boy, does that feel good? And it has felt really good for 28 years of the Motley Fool. Yeah, I think there's a theme here that I've been learning over the years, which is that being too clever can come back to bite you. You can really simplify and not overthink things. Going back to your bunting example, it sounds smart. And there's so much many things about investing that sounds smart, but there's a lot of things that are just simple and straightforward that actually end up working, and I love that. So let's talk about rule-breaking companies. You've narrowed this down to six attributes about finding what it

Starting point is 00:07:27 takes to find a rule-breaking company. So I'd love if you could highlight a few of those attributes for us. Well, I'll just go straight through them really fast, and then we can talk about any that you'd like to. So the first attribute is probably the most important one, being a top dog and a first mover in an important emerging industry. So I love to find the companies that are the leaders. If you're not the lead Husky, the view never changes. And so we're always asking, you know, who's the leader, but not anywhere, not in big oil today or telecom. I love important emerging industries. That's where most of the great stocks come from, the ones that make you money for 20 plus years. I'm going to be invested for at least 20 years in your company generally when I buy it.

Starting point is 00:08:07 So that's why it's important to me. So that's number of Number one. Number two, we're looking for a sustainable, competitive advantage. That takes many different forms. Examples would be, we've got Jeff Bezos, you don't. So the founders, the human capital and companies, certainly within the world of biotechnology, there's patent production for 20 years for your successful new drug. That's an example of a competitive advantage. And others competitive advantage is if everybody else is inept and you're not. Smartest guy in the room kind of the thing. And, you know, Reed Hastings has proved himself that within the area of entertainment. It used to be DVD through the mail, which I certainly remember back in the day,

Starting point is 00:08:44 not so long ago, although it sounds awfully old school as I say it. So, you know, there are lots of forms of sustainable competitive advantage. But, Trey, if you're going to be investing for years, you need a sustainable competitive advantage. It can't be something that looks like it'll be hot this quarter or next year. It's got to be a sustainable competitive advantage. Number three, strong past price appreciation. This one goes against a lot of people's instincts and even my own human instincts initially. We love stocks that have been amazing already. Number four, we're looking for good management and smart backing. It's the people in the end, not the product, not the service, not the industry or the competitive set or whatever. It's the people that are making the decisions.

Starting point is 00:09:24 You know this because you're a successful entrepreneur on your own and you're a successful investor. here we are talking with each other so you know it's about the people. There's no better way to learn that than to actually start a business yourself and realize what a human endeavor it is. Number five, we're looking for companies with strong consumer appeal. I love to find the great brands. Turns out Starbucks, yeah, Apple, yeah, the great biggest brands of our time are also the greatest biggest performing stocks if you really look at it over meaningful periods of time.

Starting point is 00:09:56 And that is not luck. That's a one-to-one. So the strength of creating a great brand, really a good thing to look for in your stocks. And then number six, the final one is we're looking for companies that people think and call out as overvalued. Again, that goes against our instincts, just like trait number three, which we talked about strong past price appreciation. We're talking here about the stocks.

Starting point is 00:10:20 A lot of those six attributes I just share with you are about the company, not the stock, but number three and number six are looking at the stock. And the more people who think that a company is dramatically overvalued, if it to quickly review is a top dog and first mover, an important emerging industry with a sustainable competitive badge, it's got strong past price appreciation, good management, smart backing, and strong consumer appeal. And some guy in the front cover of Barron's is telling you it's crazy overvalued Tesla. That's often an incredibly good signal.

Starting point is 00:10:51 There's a powerful reason why that's the case. We can talk about that more. but there's a quick short course on the six traits that we're looking for in rule breaker stocks. As you were outlining those, I noticed that four out of the six attributes are essentially qualitative components. How are you filtering down a universe to find these stocks based on qualitative metrics? Obviously, we all know how to filter through quantitative, but how are you distilling down from this wide universe of stocks to find these treasures in the rough? Well, thank you. First thing I'll say to that is that I don't actually distill down. What's funny is that that sort of comes from a deductive mentality where you're starting with everything, Sherlock Holmes, and then you're deducing down to who done it. And that's what people do when they screen for stocks. But I've never done that. I don't have a screen that I use. And you're right. I try to avoid numbers in a lot of cases, which we'll talk a little bit more about. But what I do is the opposite. I induce. It's an inductive approach. So it's grassroots,

Starting point is 00:11:53 flip up a stone, look what's underneath that stone. Oh, that's interesting. And once you flip up enough stones, you start to get some pattern recognition about what's working or what's not or what are the interesting companies or what's not. So it's just one stone after another that you're flipping up because you're learning. You talked about that earlier, you're learning as you go. It's so helpful always to be learning machines in this world. So you're learning a lot, but I will say that it's really important to me not to try to deduce or be the really smart guy because it sounds so smart. Sherlock Holmes sounds so smart, but it's not really a way to successfully invest, I don't think. At least for me, the style is inductive. And then, you know, how did I arrive at

Starting point is 00:12:33 that? How do we build that up over time? Well, I think we're living in a world today that is numbers crazy. And I celebrate that. We talked earlier about baseball and Bill James, man, are there amazing analytics, not just for baseball, but for all major sports today. There's so much more advanced than how people were thinking just 20 years ago, let alone 100 years ago. These are sports that have been played for decades, if not hundreds of years in some cases. And so, look, all we ever had to do was ask smarter questions and give better answers. And that's how we've gotten smarter about baseball and so many other things. But the problem with that, at least from a stock market angle, is that at this point, so much of it is a numerical exercise for lots of people.

Starting point is 00:13:13 It's algorithmic. They're programming their computers to trade inside of a second. And I'm not going to be doing that. I'm an amateur. I am not going to ever spend time trying to make money within a second. And if I did, I would always lose to the computer if we're playing head to head. So the way that I think we can not just survive, but thrive. It's just as true today, by the way, as it was 50 years ago, but the way we can thrive today

Starting point is 00:13:37 is by looking at the qualitative factors and by getting some wisdom, horse sense, and satire. heavy in our minds. And that's what my six traits are trying to do. They're trying to get you to ask the really important questions because truly a sustainable competitive advantage means so much more to me than an attractive looking price to sales ratio. I mean, it's so much deeper, it's harder to earn, and it's so much less ephemeral. It will stand the test of time in a time where people are meaming stocks up and down like silly. And it's also short term. And it's not really going to create sustainable wealth for people playing short-term games. At least while some people may be good at that, I never will be. And I don't think most of us want to spend our time in life

Starting point is 00:14:18 that way. So, yeah, I think the qualitative is with a capital cue for me, Trey. And it's, it's an important reminder of how to thrive in an age that's increasingly going to be fast and robotic. Well, one of the most contrarian attributes on that list is the overvalued piece. So you're essentially saying, if someone's saying this stock is incredibly overvalued, that is a buy signal. Walk us through your thinking around this and how you've come to adopt this. Well, I think it's really important, first of all, to integrate that with the previous five, which is what I tried to do in my shaggy dog answer I gave a few minutes ago, because the whole framework hangs together. If you just isolate one of those factors like that last one you mentioned, it doesn't work every time.

Starting point is 00:15:01 There are things that are crazy overvalued and that you wouldn't want to buy. But when you're seeing the full integration of the model and you're saying yes, yes, yes, yes, yes, and everybody's saying it's overvalued, that really does work. It doesn't work every time, by the way. And when it doesn't work, you can lose dramatically. And we're going to talk, I know, about losing dramatically and what that really means. I hope we'll get to that, maybe with an upcoming question, Trey. But, you know, for me, it's the math of it is so wildly in our favor when we can find

Starting point is 00:15:33 companies that have these great attributes and everybody is not believing in. Because what happens on the market is, as is often said, great stocks climb a wall of worry. And so if everybody thinks in 1997 that Amazon is crazy overvalued, is near bankruptcy, is never going to make it, then those people don't own the stock. And so if you and I own the stock, over the course of the next five years to 2002, 2007, 12, 17, 2012, Amazon proves itself. People start signing up for Amazon Prime who would never have bought the stock eight years before. They're seeing the convenience of it. Then Amazon Web Services shows up, which I could never have predicted myself when we first bought Amazon. And the list goes on. And those skeptics become believers. And in some cases,

Starting point is 00:16:21 shareholders. And that's what powers, I think, the best stocks of every general. It's that extreme skepticism around the early days of that entity and then the conversion that you have to let take place over time, by the way, with fits and starts, because Amazon went from three when I first bought it to 95. And then in the wreckage of 2001, two, it went back to seven. That hurt a lot. We had a 30 bagger and then it basically lost almost all of that, but we kept holding. And we've kept holding all the way through.

Starting point is 00:16:54 I've held all the way through, and it has been an incredible front seat lesson into what really works if you take the rule breaker approach. I also want to just hasten to add that there are many approaches to investing. So the one I'm giving you that I've shared in many ways for 20 plus years is just mine. I'm definitely not here to say my road is the only road. In fact, my road stops working if everybody becomes convinced that that's the way to play the game. I really need Warren Buffett to be the anti-Buffet, even though I respect so many things about

Starting point is 00:17:24 Warren and his crowd, I need them to say things like, I can't predict technology. I'm not going to buy Amazon or Apple or many of the best stocks of the last 20 years. I'm going to stick with Geico and seize candies. And I love that about him. And that works for him because that's what he does. And he's become the greatest investor of all time, I think, because he's sticking to his knitting. But I need that to exist to have my approach breaking the rules work. And so there are many different ways to approach the markets, business, and life. You and Bezos must be the only two people that have held for all of that. I think there's some other Mali Fool.

Starting point is 00:18:02 Occasionally I'll get notes from Mali Fool members who were with us way back in the day, our AOL days. It was really kind of the web was only just showing up in the late 90s. And so occasionally we'll get notes from people. I mean, I'm constantly trying to tell people to hold, hold, hold. I'm mirroring that through my podcast through everything that we do with The Fool. It's not just me. It's my brother, Tom, and it's the whole Motley Fool approach.

Starting point is 00:18:23 So I think we've gotten a lot of people more on board with holding great companies. And I really do think we're creating a lot of prosperity with our membership by doing that. It still remains a real fringe way of thinking about finance. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, In every conversation you have is with people who are actually shaping the future.

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Starting point is 00:22:46 Back to the show. Let's talk about a couple of the winners, but I also want to touch on the losers, as you mentioned. So this approach, again, I don't think a lot of our retail investors have necessarily walked through a venture capital-esque model. But those models typically show that you're going to put 20 to 40 bets out there, and you need one or two to really become. an outlier and break through, and a lot of the rest can go to zero, and you're still going to net out in a positive direction. This approach resembles that to a degree, in my opinion, because,

Starting point is 00:23:17 as you said, you had a lot of losers, but they don't seem to matter if you have something like Amazon in your portfolio that you've been holding all this time that kind of wipes away all of those other losses. So talk to us about what you typically find is the reason something becomes a loser in the portfolio, given that you're approaching it with the same mentality as the other picks. Yeah. So I'm never going to be the headstrong guy who thinks he's so smart that he knows the next great stock.

Starting point is 00:23:43 All I'm going to do is say, we're going to buy a bunch of these. And within this stocked pond of top dogs and first movers and important emerging industries, et cetera, we have a consistent ability to find the best stocks of our time. And there are also a lot of fish that you find that don't taste that good or you want to toss back or you wish you could toss back. But unfortunately, you bought the stock. And so tossing back means selling it a loss. So I'm very comfortable losing.

Starting point is 00:24:11 And part of the beauty of losing in investing is the most you can ever lose unless you're doing something really silly, which I've never done, is 100%. I guess people can lever up and they can lose a huge amount. And it's usually somebody else's money when they're levering up. And that's unfortunate. But I've never done anything. I don't buy stocks on margin. I don't do anything silly.

Starting point is 00:24:30 I'm just a very simple vanilla common stock investor. So the worst we can ever do is lose 100%. Psychologists tell us that the human brain works this way. The pain of loss is three times the joy of gain. That's hardwired. That's explained by hundreds of thousands of years of Homo sapiens managing to survive at this point. So that's hardwired in all of us.

Starting point is 00:24:51 And people approach investing with the same way. They're trying to avoid losers. A lot of people sign up for their first spot-li-full-service. They buy a stock. It might be a bad pick for me. It's down 10% a month later. I'm like, oh my gosh, this is horrible. What do I do?

Starting point is 00:25:04 Do I sell? This is often the new mentality. They're fearing law. They don't want to lose. And I understand, right, they saved that money. That was their money. They then risked it and they lost some of it. It doesn't feel good at all.

Starting point is 00:25:18 But if you can take a contrarian approach here, if you can flip your mentality a little bit and just realize that while that's true, the joy of gain in investing is actually infinite times the pain of loss. So it directly reverses our physical hard wiring. Because, of course, and let's talk about some great stocks. We've already mentioned some, Amazon, Netflix, and Vidiya has been pretty amazing in recent years. That's a long-term stock for us. These stocks can go up a hundred or more times in value.

Starting point is 00:25:47 So you're going to take the pain of loss all day long if you're capped at a minus 100%, but you can make plus 10,000 percent. And so that's, again, a really important rule-breakery way of thinking that not everybody's going to adopt or want to adopt or could really fit with their psychology. And that's why I'm always saying this is one approach. And this is my home brew here. We're building a plan as we fly for a rule breaker investing over 27 years. But yeah, that's the math of it. And so that's why I'm willing, like venture capitalist, Trey, to say, hey, you know what? We're going to buy 25 stocks, not one stock. And we're going to put even amounts, fair starting line for all 25 horses in

Starting point is 00:26:29 our Kentucky Derby that we're about to unleash as we start our portfolio. I'm not sure which one's going to win the race. But as I've often said in another context, which is the habits we can develop as rule breaker investors, which is a separate list of six things. But one of the things you can do with your portfolio is you can actually bet during the race. You can't do that with the Kentucky Derby last I checked. But once Secretariat is out front, you can be investing in Secretariat every furlong all the way to the finish.

Starting point is 00:26:59 And winners win. That's my experience. More often than not, I see it in sports, which I'm not. I love. I see it in life, business, and yeah, stocks too. And so the beauty of this is we can invest in the winners. We can add to them. We don't need to be so in fear of losing, which so many people are. I love it. And I'd love to dig in on Navidia a little bit more because it has been a huge outliers, you mentioned. And I think, as I read, you bought it around $6 a share. So it's obviously done very well. But then again, you know, the whole year of 2019, it was in a slump. So that's where

Starting point is 00:27:33 people can get really antsy. Walk us through what you saw in something like Navidia at $6 share and what constitution had to be in place during that year of a slump where I'm sure people were emailing you all the time saying, should I still be holding? Should I still be holding? So walk us through that mentality. Well, I love that stock and that company. I'm delighted that we're talking about it. And I will just mention not trying to brag here, but our cost is actually $1.63 because there was a four for one split a couple of months ago. So our cost is a buck 63 with the stock somewhere rocking, I don't know, 222 as we speak. So it has been an absolute monster. It's one of those

Starting point is 00:28:13 companies and there are many of them actually, not the only one that we've held for long periods of time and made 50, 100 plus times our money on, which astounds most people, but it's so easy. All we're doing is buying and holding. Amazing, isn't it. But Nvidia isn't just a great one-year story. It's actually a great for us, for me, 17. actually 16 and a half year story. So, and I'll just talk you briefly through the movements of the stock. April 15th, 2005, I picked it at $1.63. So April 2005, by October 2007, two and a half years later, it's gone from a buck 60 to 10.

Starting point is 00:28:50 Amazing. Felt great. Five bagger. You may remember 2008 wasn't a great year for the market or for stocks. And VDIA then dropped from 10, where we had a five bagger to below 150. i.e. we lost all of our profits and we're underwater, and this is now three years after we bought the stock. Six years later, we kind of come out of the wreckage of 2008-9, Jensen Wong, one of the great underrated CEOs of our time. The stock has made it back to five. We're now back to a three-bagger,

Starting point is 00:29:21 buck 60 to five at the end of 2014. We've now held nine years. It then crosses 10 in 2016. So it doubles again. And in 2007, Actually, 2016, it closes out on a run, closes out in a run from seven, it goes to 23 and becomes the top performer on the S&P 500 for the year 2016. So it's now at 23, our cost of $1.60, we're now in year 11. It's very important for me, anyway, to add to winners. So I'm never trying to double down. As soon as I find out a stock as the top performer in the S&P 500 for a year, you might think, well, that's the one to rotate out. of in the following year. But for my lethal members, I said, my new best idea, January 2017,

Starting point is 00:30:09 is NVIDIA, which is, you know, now at 22 or so. It closes 2017 at 52. So it basically more than doubles again. And to bring this long story to a quick ending, 2018, tough year for Nvidia. This is before 19 and it stalled out. It dropped from 70, where it had gotten up to, down to 30. So the stock gets more than cut in half. This is a world beating company. This was during the period in 2018, where a lot had been invested in AI and crypto and Nvidia chips were making those things happen. And all of a sudden, those things slowed down, especially the crypto market and the company got hit. Now, it wasn't its results necessarily. it was Wall Street's perception of Nvidia.

Starting point is 00:30:56 But now the stock, of course, is gone from 30, where it sat there at the end of 2018, more than cut in half that year. It didn't feel good. It's gone, of course, from 30 to 222. So now we're sitting on our $1.63 cost bases at 222. And I'm fully prepared for it to get cut in half again and or to double again because I'm not looking at the numbers or playing a jump in, jump out. What's my target price kind of a game?

Starting point is 00:31:24 am in it to win it because this is one of the great companies of this era. I never know when I first invest in them, whether it will be, but we get smarter watching the companies as they go and grow. This is obviously one of those. And so we have a consistent knack using the rule breaker framework to identify these companies early on as upstarts that people don't believe in. And then the ones that work out become monsters. And the ones that don't work out become irrelevant as they vanish away into small cost bases, I should say small allocations within our portfolio because we're not adding to those. So what I've tried to mix in here is some combination tray of telling the full story of the long

Starting point is 00:32:06 hold and what that feels like and looks like for an investor. And then also, I want people to know that it's okay to stomach volatility and to realize that you'll have some losers alongside these kinds of companies. But as you said earlier, when you have a stock like this, it powers your portfolio. to market beating returns on its own. So this is really what investing is. And to me, this is rule breaker investing. This is often not taught and certainly not practiced by most of the institutional traders today. And it's just one approach, but I can't think of a better one. Well, you can't teach the feeling of something dropping back down to a $1.50 after it's gone

Starting point is 00:32:45 over $10. And I definitely understand that. I'm guessing that when it was at $1.50, you were reassessing and noticing that the underlying story really hadn't changed. The CEO was still great, the product's still great, they're still ahead of the pack. But I guess what I'm getting at is, how did you come to identify that it had not become a loser? And it was still just underpriced. It's because I probably wasn't analyzing it that deeply because this is one of a bunch of stocks that I follow and that I've recommended.

Starting point is 00:33:15 Or for all of us in our portfolios, I hope you have at least 20, 25 stocks, at least for most of us. And so, you know, which ones do you want to go deep on and how much time do you want to spend? So I probably just simply had my head under my pillow at the time, lapping up my losses and hiding from the world because it hurts when you watch a stock like Amazon go from 95 to 70, you held it all the way down or Nvidia here from 10 to a buck 50. That really hurts. And it isn't just those companies or stories, right? It was 2001. It was 2008. It was the whole market, systemic problems that were in place. But you're right, it's that focus on the business, not the stock that always steals our confidence or helps you in times of need. Looking at the

Starting point is 00:33:58 company's real results, I mean, Netflix got absolutely waxed in, I think it was 2011 when they had the whole Quixter incident, self-inflicted gunshot wound in a lot of ways, but the stock got really badly hammered. And yet, if you look back, while Netflix lost about three quarters of its value in about one year's time. And as a long-time Netflix bowl, it's my largest holding, that also hurt a lot. At the same time, if you actually looked at their membership numbers, at their worst moment, they had gone from something like 24 million to 23.2 million members. It's not like everybody canceled Netflix because of Quickster. Actually, many people signed up for Netflix probably, and some canceled. And they had a brief net loss in membership, which was like

Starting point is 00:34:44 the first time that's happened to Netflix, and it's very, very rare. So the market certainly didn't like that, but at the same time, let's look at the numbers here. That's a tiny percentage of overall lost clients. And Netflix still had so many great assets in place. We don't have to talk about them today. But that's a great example at a reminder to look at the business, not so much the stock. And when the stock is going crazy either direction, the business is what really is the ballast for our thinking. It gives us the basis, I think, for me anyway, for holding through hard times for companies like these. Could you provide any other examples of something that you had to sell and why?

Starting point is 00:35:21 It's something fundamental change. What drove you to sell and maybe the one that stands out the most for you? I do sell. I don't do it very often. I don't think I've sold a stock that wasn't bought out that I had to sell out for a few years now. And I'm just talking here about my own personal portfolio. So I basically do in public what I do privately, which is I just find great companies to buy and hold them. When do I sell? I sell when the thesis is broken. I sell when I love the company

Starting point is 00:35:49 still, but somebody else came around with something better. There's a better mousetrap or a new approach. There's disruption happening. I'm a big Clayton Christensen fan, the innovator's dilemma and that thinking. Of course, disruption is what a lot of rule breakers do. I'm also, by the way, a big fan of Malcolm Gladwell's work on how David beats Goliath, which some listeners will recognize you can read his book if you like, or you can just read The New Yorker. I think that's free. article that spawned the book. But it's, again, a lot of the principles we're talking about. These are things I've lived as a stockpaker or as an entrepreneur for 20 years. So I love that he said them and articulated them because I think they're true. At least they're true

Starting point is 00:36:26 to my experience. And so taking that different angle, you just, you have to be comfortable winning and losing. And you have to recognize, especially, that loss is overrated. if you're willing to show resilience and if you aren't doing silly things. And I earlier mentioned like not trading on margin. A lot of people are doing crazy stuff or they have everything in one stock. And so I've often talked about the importance of knowing your sleep number, which I define as the percentage of your portfolio that you would put in your biggest holding, that you would allow your biggest holding to occupy as a percent of your allocation

Starting point is 00:37:02 and still be able to sleep at night. And again, here too, there are people with wildly different. sleep numbers. And most mutual funds are 1% because they have to remain broadly diversified. But we as individual investors can allow our portfolios to be taken over by great stocks if we want to, if we're comfortable and can sleep at night, not everybody is. Anyway, I think I got off track there because I just think so much about winning and losing about rules and breaking rules. By the way, rules are important. I love to break the rules, but you also have to have rules.

Starting point is 00:37:36 Like, if you're going to be anti-Buffet, you have to have Buffett. And you got to love rules and love Buffett, but you also can recognize the benefit of breaking them. Do you ever play the card game of Bridge, Trey? No one plays this game anymore. Do you ever play? I've never gotten into it, honestly. I love other card games, but not that one.

Starting point is 00:37:53 And I appreciate that. And, you know, Bridge is a lot of ways of lost art. I still go to Bridge events and everybody, I'm 55, everybody's 20 years older than I am. And part of it is because there's a whole bidding system, which you have to learn And so there's a big hurdle to entry to actually just even play bridge, let alone be really good at it. But the key thing I've always learned as an observer of the game of bridge for a couple decades is you have to know how to bid. You have to know the rules to even be able to play. But if you want to win at tournaments, when everybody else is going by the book and the conventional wisdom and the rules, you decide I'm not going to do that in this context.

Starting point is 00:38:27 And that's what wins tournaments in bridge. So as a gamer, I often think of that as like a great example of like learning a whole system and respecting the system in order to break the system at the right moment to win. Well, I have to highlight some similarities I'm hearing right here to Buffett because you did mention you never read a book on Buffett, which I definitely appreciate. But there are a couple similarities. Not only is he a master bridge player, but also that what you're talking about, in my opinion, is this idea of owning a business, not owning a stock.

Starting point is 00:38:57 You come across to me as someone who really thinks and has basically synthesizing that idea. When you buy a stock, I imagine you in your mind am thinking, I am an owner of this company. And that is probably the differentiator with a lot of other retail investors. Does that sound accurate? I would certainly agree with that. And I wouldn't even speak about other investors because some will totally get this and some will totally not believe in it. And that's fine too. But for my own part, yes, that's how I think about it.

Starting point is 00:39:27 That's how I was raised by a dad who understood that, our big stock as kids that we watched blow up in dad's portfolio, as he taught us, was the Washington Post Company, a newspaper company these days a sleepier business, but back then, I mean, a big brand and Buffett was on the board. Catherine Graham, who's had a movie made about her, the Graham family, a multi-generational family that steered the Washington Post to huge returns. It was a beautifully managed business and we watched our dad with a low-cost basis, let that stock run up for him. And we saw it was a product we knew, was delivered to our door every day. We knew it, trusted it. It was about the business. It was about what that company does in the world. Footnote again,

Starting point is 00:40:10 conscious capitalism, if we want to talk about it. But, you know, so important to me that I be and you be invested in things that if they prosper, we feel great about that future. Make your portfolio reflect your best vision for our future. I might have that on my gravestone or somewhere nearby because that's what I've tried to say to the world and what each of us should be thinking about as we build our portfolio. So it's not about a ticker, not about a chart. I mean, for some people, it can be, but you're really missing it if you don't realize that you're actually causing something to thrive when you buy from it, when you buy it stock. And if you don't buy from somebody else down the block or ignore this other stock, it loses a little value, little power, because

Starting point is 00:40:52 you didn't care enough about it. And that's exactly what we're doing at a human level every day. Computers are doing it two these days, but we're buying businesses. And so, yeah, that's how I think about it. And I think that's how everybody should think about it. And there's no substitute for being an entrepreneur and seeing that and feeling that as you build your own business. And again, Trey, I'm talking to a guy who understands kombucha and who understands how to manage a national brand. And so you know all of the efforts that it takes to go from light bulb overhead to real product or service that is improving people's lives. And once you see that, you see what an entirely human endeavor investing, I think, should be. And it's always about the businesses, not so much the stock.

Starting point is 00:41:32 One attribute of businesses that's popped up on my radar only recently, mainly after I was interviewing Jim Collins, who brought it up, is this idea of optionality. And I've heard you talk about this as well, but I'm curious, this has just not been on my radar. Maybe circles back to Vida somewhat because chips can be very versatile. And I understand that to a degree, but I haven't factored that into my analysis very often saying, what is the optionality of this company? How broad can it really stretch its wings to even grow its tam? So maybe talk to us about how you identify optionality, especially in the early stages of a business. Thank you. Andy Cross, our longtime chief investment officer at the Motley Fool, and of course a great friend to Tom and to me, Andy once said

Starting point is 00:42:16 about me, he said, you know, David, what I realize is Buffett is looking for companies with one future and you know what it's going to be. It's still going to be car insurance, five, 15 years later. It's still going to be chocolates. It's still going to be the Washington Post back in the day. He loves the certainty that this company is going to do its thing. And you are looking for companies with infinite possible futures as a directly different approach. And I was like, you're right. I am looking for companies that have lots of possible futures. That means they have usually lots of irons in the fire. You think about alphabet. It was initially Google, but these days it's alphabet, partly showing the optionality of one powerful business idea and what else it can

Starting point is 00:42:59 lead to. But you see companies morph over time when they have possibilities. It takes two things primarily to have this kind of optionality, which is the word that we use. I use a lot for describing this. The first thing it takes is capital. You don't have a lot of optionality, even if you have a cool new app or a cool business idea, and you don't have any money in the bank. You don't have cash on the balance sheet or you're beholden to lots of debt. So the number one thing you really need to be optional and to have new possibilities is you have to be able to screw up a bunch, because that's what we do is innovators and humans. We screw up a bunch. So you need to be able to spend the money through that to get to the right idea or the next, the next hill to take for your

Starting point is 00:43:42 business. And so that's the first thing you need. Of course, the second thing you need is you need sort of an open-ended context. The internet is an incredible platform for optionality. For the Motley Fool, we could just launch with one service, but then it didn't take a lot of effort necessarily for us to open up another service in Australia. And so international optionality. Like which American brands can really live globally like Starbucks and which are much more confined perhaps to the US of A. I don't know, let's go with Chick-fil-A. Although Chick-fil-A, I think it's mainly a domestic private business.

Starting point is 00:44:20 I don't think I see a lot internationally. Maybe it doesn't have international aspirations or something that's really Americana isn't going to do so well in Europe or Asia. Right. So one form of optionality is how many different places could you take your widget? but then could you morph your widget? Could you, for a lot of biotech companies, they're initially approved by the FDA for one indication, but all of a sudden they discover it also works for this other indication,

Starting point is 00:44:46 so optionality. So that open-ended context I'm always looking for, now it's not going to be true of every stock I recommend or every stock you and I should have in our portfolios. It's wonderful to have companies sometimes that are just steady eddies and get it done. But especially I think about technology constantly changing and speeding up. You need to, if possible, even if you're, let's say, Old Dominion Freight Lines, which is a longstanding trucking and logistics company based in the state of Virginia, which has been a wonderful performer for public market investors and motleyful members as well for years now.

Starting point is 00:45:20 But, you know, you're a trucking company. But what's your edge? Your edge is your logistics and what drives your logistics, your use of technology. So if you're running a less than truckload business, that means that you're not just taking your big cab behind you and it's full of just widgets and you're taking it from place A to place B, you actually have a few tubas. You've got some food to deliver another place. And this third thing in the back of your truck as well, we'll just go with, I don't know, we already went with perishables and musical instruments. How about let's just go with some Nvidia chips, all right? So you've got

Starting point is 00:45:52 all three of these things and you're going not just from A to B, but from A to B to C to D and then to E. That's a much more complex business. And the reason Old Dominion freight line, has been a winner is because it does that so well. It's using technology. So we need to be able to picture in that open-ended context, I think, making use of technology and ever-changing technology, not being threatened by that or hostile toward that, but being open to that. So those are a few of the conditions I look for in optionality. I love, and we can talk more about this if you like, but I love the companies that transform themselves, Amazon, Earth's biggest bookseller, in fact, for those watching this, if this is on video, I don't even know. On YouTube, here's my

Starting point is 00:46:31 mouse pad, Earth's biggest bookseller, it says at the bottom, this is my Amazon mousepad. I've been rocking. Earth's biggest bookstore, it says, since, yeah, since about 1997. And wow, it's a lot more than Earth's biggest bookstore today, isn't it? And so that's because Amazon has optionality and recognizing that infinite possible futures is a big part of rule breaker investing. I love it. I've been kind of collecting, I would say, different people's definitions of risk over the course

Starting point is 00:46:58 of the show and, or at least how they go about measuring. it, you have developed a 25-point system for risk. And while we might not have time to go through all 25 points, I'd love it if you could just highlight maybe a few that come to mind. I'll just briefly explain about, we're definitely not going to go through the 25, but I'll just briefly explain that I wanted to create a tool that anybody could use that allows you to rate the risk of a stock. Now, I personally don't think that there's any really good, defined way of rating the riskiness of stocks. We do that a lot with debt these days. And there whole firms, moody's that rate the debt of things, the financial viability. But to actually

Starting point is 00:47:34 look at a stock and say, what is the risk of that stock? The unsatisfying answers I've often seen the past are medium, low to medium. I'm always like, what does that even mean? So for me, we first have to define risk, and I define risk as the chances that holding this instrument over a long period of time, you would suffer in the end a dramatic loss. That's the risk that I try to avoid. If it's just beta, like how much does this stock bump up and down? I don't think that's a very satisfying approach to risk. That's sort of like using batting average going back to baseball to evaluate who's a really good, valuable hitter in baseball. It's kind of intuitive in some ways understandable, but how much the stock bounces around is not really, to me, what risk is about.

Starting point is 00:48:19 So I first tried to define my term, and then I tried to build a simple system that's 25 points. they're actually questions and each one is simply a yes or a no. So for each of the 25 points, well, it's a question. It's a simple yes or no answer. It's a binary question. And every time you say yes, that's good. Every time you say no to the question, that's bad and you add a point. So if you have 25 noes, that's 25 points.

Starting point is 00:48:49 That's the riskiest imaginable investment. So again, higher the rating, hire the rating. higher the risk. So I'll give you a few examples of the yes or no questions we ask. This is really off the top. I haven't really prepared this. But how about number one? The first one we asked, was the company profitable during the previous quarter and past 12 months? Yes or no? Now, does that mean it's a good stock or that the company is a good company or not? No, not necessarily. It's connected. I mean, those things matter. But none of this is a litmus test. in the end for the company or the investment.

Starting point is 00:49:27 We're just accumulating answers. And again, every time we say no, we're like, that's looking a little riskier to me. And I probably would favor things of less risk. I'll give you a couple more examples and then the key insight that I have from this risk rating system, which anybody can use, by the way. Another example is, does the company maintain a high standard of disclosure consistent with SEC guidelines in the U.S.? Actually, even better, that's number eight.

Starting point is 00:49:51 Number nine is, would an intermediate level investor find the company? these financial statements and management ownership disclosures, relatively easy to sift through and understand. So how transparent is this company? How easy or not is it to read its financial statements? Is that an all or nothing litmus test for the company or how good the stock's going to be? No. Is that a helpful thing to think about and say yes to or no to?

Starting point is 00:50:17 Yes. Another example, number 13, moat. I mean, we talked about sustainable advantage. Warren Buffett calls it a moat. would potential new competitors face high economic, technological, or regulatory barriers to entry? Yes or no? Yes is good. Hard to mess with them.

Starting point is 00:50:34 Big moat. No is bad. So as you do this, you end up building up a risk rating. And rather than say low to medium or high risk, you can say four or 16, which to me is a much more intelligent answer or way to talk about it, even though it's obtuse initially or it's abut. or it's obfuscatory of it's not transparent to somebody if you see, say, eight, an answer to the question. But then you can explain that the aid is based on eight knows and you can give the exact homework that you did to explain why it's an eight.

Starting point is 00:51:07 And the key insight about this to close my answer, thanks for asking me about the system. I haven't talked about it in many interviews, but it's something that I've done for years for my picks in Rule Breakers and Stock Advisor, the two services that I picked for for a couple of decades. The key insight is this. People think that risk equals reward. I disagree. I think this is another example of conventionalism. They think, oh, the greater the risk, the greater the reward. Actually, secret, some of our great performers have had low numbers. So it turns out you can have your cake and eat it too. You can buy a low risk company that becomes one of the great performers on our markets over the following 25 years, the biggest challenge for most people is

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Starting point is 00:55:27 You've actually mentioned conscious capitalism a couple of times, and you're on the board of a nonprofit called conscious capitalism. And as John Mackey is as well, he actually wrote a book on conscious capitalism. That was one of the first business books I ever read that inspired my own company. But talk us through the importance of conscious capitalism, what the differentiation is there and what this organization does to help businesses. Yeah, for me, it's just a better way to practice capitalism. Capitalism is much malign.

Starting point is 00:55:58 And there are all kinds of examples of excess and failure and greed that have been part of the American story and the worldwide story of capitalism run amok in years past. In Enron, which was a stock that I had in one of my portfolios at one point, would be a good example, a poster child, a lot of us can relate to. But there are many examples of failed humans who are running businesses or failed enterprises. And that's not what we're talking about when we talk about conscious capitalism, because most of those failed enterprises were either really short-term oriented, which tragically Enron really was, just trying to look great for a little, while. But at the heart of it, at the heart of conscious capitalism to talk about why I love it and the

Starting point is 00:56:38 good form of capitalism, there are four tenets. We won't go over them right now, but two all highlight for our conversation. And Trey, you already know them because you read the book. And I love that. And by the way, John Mackie's on our board. And I think he's one of the great business minds of our time. The two I want to highlight are the first one, which is purpose over profit, companies that have a higher purpose. You can see it in their statements they make about themselves. Does Tesla say as its purpose, it wants to make one heck of a lot of money and glorify its founder, Elon? Well, some of that has happened. But no, Tesla says it's trying to accelerate our adoption of sustainable energy for our future. That's basically the purpose of the corporation. That's why it's about more than just

Starting point is 00:57:22 cars. It's obviously about solar panels, et cetera. It's about a mindset. And that's a great purpose statement. Amazon, for years, of course, Jeff Bezos, to be Earth's most customer-centric Neither of those statements, the Molly Fool statement, to make the world smarter, happier, and richer. None of those statements says anything about trying to make a heck of a lot of money or make shareholder, maximize shareholder value, anything. It's talking about the purpose of the enterprises. And the ones that really get that and do that well, I would say the conscious capitalism

Starting point is 00:57:53 enterprises out there, the employees know that and feel that. It's authentic. It's not greenwashed or pasted on by a CEO or a private equity firm that bought the company. why it was started. It's why you started your business, Trey, out of a vision of making the world better, a product or service, a guy who had a light bulb and the guts to start something, right? And so higher purpose is what drives so much of us in life, purpose-driven leadership. There are many examples of this, but it happens in business too. And you can see it when I go to the Conscious Capitalism Summit every year, as I'm about to in Austin, Texas, this October, once again,

Starting point is 00:58:27 I regularly shake hands with hug people who are doing amazing things, small businesses in large because they're going for higher purpose. And just like if you search for happiness in your life, you probably won't find it. But if you search for doing something meaningful, you'll be happy. The same thing is true of profit in business. If you're starting a business to make a lot of money, you're probably not going to make it. You're probably not going to be happy. If you're starting a business to improve the world or the lives of people in your neighborhood or your state or country, you're very likely to get profits. And ironically, the companies that search for profit least often have the most. That's a critical thing for many people, especially people who are just

Starting point is 00:59:11 investors. They're not entrepreneurs. In many cases, these investors just look at technical charts. They don't actually care what the company does. They're not noticing that or feeling them. That's why they miss or don't hold these great companies because they're looking at a chart or a screen set of ticker symbols and their computers trading for them. Meanwhile, life is happen. And real entrepreneurs are creating great enterprises and the greatest go for higher purpose. So I said I was going to mention two. I think I went a little bit long on that one. But the other one is just as beefy and just as important. These things are known by different phrases. I use conscious capitalism because that's the board that I'm on and John Mackey's

Starting point is 00:59:47 book was entitled conscious capitalism. And I love that phrase. It causes people who have never heard that before to go, what's that? Which I love about it. It's kind of like the Motley Fool name. What's that? Why would they call themselves that? People have are a, are a inquisitive. But anyway, the second critical aspect of many of the best capitalistic enterprises today is that they're not trying to create a win for just one stakeholder. Because that's the story of 20th century capitalism, especially the part that ran amok. It was regularly taught in business schools. Fortune 500 CEO letters would say the purpose of the business, Milton Friedman, is to maximize shareholder value. That is the purpose of a corporation to maximize shareholder

Starting point is 01:00:29 value. While some companies did that well, a lot of others were just trying to max it out for the shareholders of whom they often were shareholders, and they were not necessarily helping our environment, in some cases their customers, maybe their employees really didn't like working there. They're kind of hosing their employees, all to, in quotes, maximize shareholder value. So this other aspect of conscious capitalism is that you state who your stakeholders are, and then you try to create a win for every one of them. It's not, we're all doing this just for those guys over there. That's why we exist.

Starting point is 01:01:05 Nope, you exist, I think, for your employees. They're the ones that are coming to work, trading their precious time over years and years of their lives every day for a salary or some form of compensation you're giving them. You definitely want to be, I hope, enriching their lives. You better be making things really great for customers. Those are going to be the businesses that win. otherwise, why do we have a business, right? So customers and employees are two obvious stakeholder

Starting point is 01:01:31 groups, but others might be, well, certainly your partners and your suppliers. Sounds like in your business, Trey, you are a supplier, maybe to Whole Foods or maybe to some other grocery stores and supermarkets out there, right? So you are a partner and a supplier, and the companies that people love to work with are when they treat their partners and suppliers. Well, they're not just trying to hose them or jack down prices on them. And a couple of other examples might be the environment. That doesn't make that much sense for the Motley Fool. We're a digital brand. The environment doesn't enter too much in. We're actually all about being wherever you want. I mean, we try to do good things for the environment. But for some businesses, that's a huge

Starting point is 01:02:08 stakeholder. So again, the great CEOs, the great for-profit corporations of our time are creating wins, intentionally so for all of their stakeholders, not just one group. So I'm glad we had a little time to talk about conscious capitalism. I don't have that much more to say about it, unless you want to talk about it some more for now. But that's what the world needs. And in fact, that's what the world's getting because the world is turning more and more consciously capitalistic than ever before. These days, young people want to go to work for the companies that are doing good. The sense of intention and intentionality of this new generation is stronger than I think it's ever been in human history. And how many people are like,

Starting point is 01:02:48 I want to be proud of the work that I do or who I'm working for. That matters to people. So guess who's going to get all the best kids coming out of college, the ones that actually think about creating a win for everybody and are serving a higher purpose. So this is a contagion in the best form. This is a good virus. This is infectious. And it's going to keep influencing American business toward the better. And the world, I think, will keep getting better. Capitalism is going to be getting better from here in a world where everybody thinks it's like a lot of sci-fi. They think it's dystopian. But all of that dystopian sci-fi itself was misplaced. Go back and look at Blade and see what year it was depicting. It's a year we've already lived through at this point.

Starting point is 01:03:29 So I think that there's a whole separate talk we won't do today about the power of optimism and about looking at real data and realizing things are getting better, not worse, even though everybody thinks things are getting worse. That's more of the contrary mentality, I guess, that I have. Well, you've touched on a couple of things. I'd love to close with one more question around this because you've talked about happiness, talked about passion, mission-driven companies. I just have to note this because we've now interviewed Morgan Housel, Brian Frawledi, now yourself.

Starting point is 01:04:00 All three of you have at least had a stint at Motley Fool, you know, in Morgan's case. You seem like some of the happiest people I've ever met, some of the most passionate people I've ever met. So it raises the question around you as a leader of your own company and developing, cultivating a positive company culture. I'd love if you could just share a few thoughts about how to do that, how you've approached company culture, and how you've produced some of the best people I've interviewed today. Well, thank you very much, Ray, and that's high compliment coming from you. And I really appreciate that. And those are two great people, and there are a lot of

Starting point is 01:04:33 others. Great. I'm happy to be here. You could have had any number of fools. My brother, Tom Gardner, has done as much, of course, for that company culture to say nothing about helping build our business as our CEO or his great investing acumen of his own. So there are a lot of really great people that are circling around our enterprise and John Mackey's on our board. And he's not the only one. We've got a lot of great people on our board. So I think there's something to be said about the power of positivity. I think at the heart of it, I've always loved the Henry, well, it's said to have been said by Henry Ford. But whether or not Henry Ford ever said this or not, it's a great line. Whether you think you can or whether you think you cannot,

Starting point is 01:05:11 you're right. And so I really do believe, and I know I'm speaking to an entrepreneur, and a lot of people are hearing me are can-do people. Because in general, it turns out a lot of the success in the world will be created by people who thought that they could create success, who actually were aspiring to success, who believed the dream, dream it, build it, as one of my favorite people in business, Roy Spence has said, he wrote a book called, a wonderful book called, It's Not What you Sell, it's What you Stand for. He's all about purpose. Look into Roy Spence. listening to me if you've not seen Roy's work before. But you realize it's the people who say, yes, we can, that actually go on to do that. Not every time. And there are sad failures along the way.

Starting point is 01:05:50 And yes, sometimes pessimists add value. And I'm certainly not here to invade against pessimism, or just being a good realist and trying to integrate those things and balance them, which I'm sure we all are trying to do. I guess I want to say one more thing about our culture, which is important. And that is that we trust. We lead with trust. And especially in the money world, you're often taught to distrust. And a lot of us do read the 10Ks going, huh, what does that footnote mean exactly? And I certainly celebrate that spirit of inquiry and also of holding people accountable, which is what we're all about, especially since we're holding our money with them over the long term. So we sure are going to be holding them accountable. But, you know, I think we always, from the first day

Starting point is 01:06:30 of our business is we hired our first cool, fun friend from college, because that's the only person we get afford to hire. We couldn't even take out ads anywhere. We didn't have any money. So who are you going to hire your cool, fun friend from college? Here's what we didn't tell that person. By the way, dude, you got to be here at 9 a.m. You got to stay till 5 p.m. Also, your first year, we're going to give you five vacation days. Those are all the things we never said.

Starting point is 01:06:52 So from the first day of our business, we basically just said, hey, you call your hours. We're not counting anybody's vacation days. You're here to get a job done. Get the job done. And we're hiring great talents. So we have a lot of confidence in you to get that. We'll be challenging you at various points and supporting you at, others, but it's that mentality, that trust-based approach. And it won't work at every company

Starting point is 01:07:14 probably, but I think especially within conscious capitalism and perhaps trade in your own company, you're there. But that's a really important part of our culture. So when you lead with trust and you're willing, you're willing to be wrong, somebody wants to violate your trust, it's going to work once anyway, because you're going to always lead with trust and you have that optimism, those things are powerful parts of our culture, as well as, of course, we're called the Motley Fool. So, I mean, it better be fun or we better be doing creative stuff. Otherwise, why are we calling ourselves in the financial services industry, the motley fool?

Starting point is 01:07:45 Like, that would be a huge mistake unless we're owning it and living it every day. I think that's a fantastic note to end on. This has been incredibly fun, David. I can't thank you enough for coming on the show and sharing all this wisdom. It's a refreshing approach. I learned a lot. I'd love to do this again sometime soon, but thank you so much for your time today. This is really appreciated it.

Starting point is 01:08:07 Thank you, Trey. You do great work. I love that you've spent time as you are learning from so many different people. And that's what we all need to do is expose ourselves to as many different types of people and thoughts as possible. Sometimes, you know, there's an old t-shirt or bumper sticker that says, whoever dies with the most toys wins. I obviously disagree. I would say whoever dies with the most friends wins. And I would even say the most diverse friends, the more we can diversify, the people that we know, the things that we're exposed to, the richer our life will be, the better our world will be. And so I really appreciate that you're a learning machine and you're going out there. And by the way, you and I are, neither one was really

Starting point is 01:08:46 raised or taught. We don't have investment degrees or entrepreneurship degrees, at least speaking only for myself. And I know we have some Chapel Hill, North Carolina. And I'm just an English literature major. But, you know, there's something to be said for lifelong learning. dropped out of college, so you at least got that on these. As did some of our best employees did The Fool. Those are usually amazing people because they're driven. David, thank you so much again. I really enjoyed it.

Starting point is 01:09:13 Thank you, Trey. Full on. All right, everybody, that's all we had for you this week. If you're loving the show, don't forget to follow us on your favorite podcast app so you get these episodes automatically. You do not want to miss some of the guests we have coming up. We always love to hear from you, so please leave us a review

Starting point is 01:09:28 or find me on Twitter at Trey Lockerby. and if you're the kind of person who likes the more quantitative approach to valuing a company, you can always find the resources we have for you at the investorspodcast.com or simply Google TIP Finance and it should pop right up. And with that, we'll see you again next time. Thank you for listening to TIP. Make sure to subscribe to millennial investing by the Investors Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision consult a professional, this show is copyrighted by the Investors Podcast Network.

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We Study Billionaires - The Investor’s Podcast Network - TIP385: Breaking the Rules w/ David Gardner

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