Last week David Gardner counted down the top 10 things he learned as a participant in the Joint Civilian Orientation Conference (JCOC), a program designed to teach civilian leaders about the military.

The Motley Fool co-founder got to see how the different branches operate. He also got up close and personal with everyone from the top brass to rank-and-file soldiers.

In this episode of Rule Breaker InvestingGardner shares more lessons he learned at the JCOC while continuing the podcast's tradition of answering questions from the mailbag at the end of each month.

A transcript follows this video.

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This podcast was recorded on Aug. 31, 2016.

DAVID GARDNER: Welcome back to Rule Breaker Investing. I'm David Gardner. It's great to have you with me this week.

I'm going to preview a few things on this [week's] show. We're going to have our August Mailbag. At the end of every month -- the last week on the last Wednesday of every month -- for almost a year, now, we've had you writing questions and me doing my best to answer them. We've got a good question about whether you should add to your winners or your losers, and how does that relate to buying in thirds (to dollar-cost averaging), so I'm looking forward to tackling that one near the end of the show.

But the preview of this show is going to sound a lot more interesting than most of my other podcasts. Also ahead this hour is what your business can learn from the military: the secret behind why the U.S. military thinks it will keep on winning, why peace isn't actually the goal in the Middle East, and a public speaking Q&A best practice. These and other observations, learnings, and tips are all part of JCOC, too. I mentioned this last week when I covered the first of this two-part series. It's the Joint Civilian Orientation Conference: the experience that I had along with about 40 other Americans a little earlier this August touring all five of the Armed Forces, here, in the United States of America.

I talked last week about my top ten things I saw, heard, or did. That was a lot of fun. I said also, last week, I need time to process this. So I've had that time, now. I thought more about it and I committed last week to you to give you some reflections and learnings. And as you may have heard from my teaser as the show opened, I've got a motley mix of different thoughts. These are unordered, but I hope it's a rich and fun conversation this week, and I will be moving to your Mailbag questions right at the end.

I want to start, and I'm not going to number these. I could, but then we'd probably hit about a dozen, or so, and the numbers would become meaningless. I'm just going to talk to you. Bounce around some of the things that we learnt and saw with the military; but more specifically, reflections and learnings I had, and I'm now sharing them back with you.

I want to start with the first one, which was very much in evidence throughout the week, and that was really seeing and being around (this is a beautiful phrase) servant leadership.

Much is made of the phrase, servant leadership. Wikipedia lets me know that it's an ancient philosophy. Lao Tzu -- we can go back about (quick math here) 2,600 years and find it introduced. Certainly we see it in the bible. Many more examples throughout history and literature. More recently, Robert Greenleaf is credited with having founded the "modern movement" toward servant leadership.

Anyway, I'm not really a student of servant leadership, but I am a big fan of it. I love it when I see it in public companies that we're invested in. As I've said in times past in this podcast, I think most of the great examples of leadership that I see today are in the private sector where I see outstanding CEOs. People like Elon Musk saying, "We need to solve this problem. Let's go do it." And they actually do it in a profitable way, which creates value for the world at large, including even shareholders. For-profit believers in some of these people like Steve Jobs, and Howard Schultz of Starbucks, and the list goes on of just great leaders that I've seen.

But throughout the week -- people that you and I don't know, whose names don't come so trippingly to the tongue for investors -- seeing and being around that kind of leadership was outstanding. I mentioned last week, at the very start of our week, Gen. Paul Selva, the second-highest ranking military officer told us, "Don't spend time with people like me this week. Spend time with the brand new people. The freshest recruits. The brightest eyes. The ones who just started. Ask them, 'Why are you here? Where did you come from?'"

That spirit was carried throughout the week. Gen. Joseph Votel, who is in charge of Central Command in Tampa spending time standing outside Central Command, shaking hands with each one of us as we came in, and then giving his own PowerPoint, himself, in an intimate, theatrical setting. We couldn't even take pictures of this or record it, at all; but then being there personally to answer each of our questions afterwards. Very evident how alive and well servant leadership is in the U.S. military.

I would love to see that in all areas of our lives, everything from the family that you might lead right through to the nation that is being led. I'd love to see that in all of our political leaders. How about in any of our political leaders? And I'm joking there, a little bit, because I certainly know some wonderful politicians. Anyway, let's keep moving.

Second coming to mind is just how little fighting is really done by the military, even at the Special Forces level. When we were with the Army Special Forces (the 75th U.S. Army Rangers) in Fort Bragg, North Carolina, it became clear to us, as civilians, that fighting is really a last resort, isn't it? I mean, it's a last resort. It comes after all kinds of efforts are made every day, by our military abroad, to try to improve other people's lives so that fighting isn't even necessary.

You know, the marines talk about three things that marines do on the ground. The first is fight insurgents (they are warriors, after all), but the second is feed the needy, and they do a ton of that. The third is just build up partner forces. Those two latter things don't often come to mind when we think about soldiers. But even among the Special Forces, one of the groups we talked with was the PSYOP group (Psychological Operations). They say their goal is to partner with local people, and get to know them, and build relationships.

In fact, I love this line. They said, "In most of the areas of the world in which we deal, the truth is really our most effective and deadliest weapon." And that's especially true when we think about countries where the truth really is not, at all, equally distributed. Where most people are not even aware of it.

For example, North Korea (which I'll be mentioning shortly) is a country where if you look at a graph of the percentage of people in North Korea using the internet, it's pretty much a flat line at zero. It's these kinds of environments where really, we [want to] get the truth in there. I realize some people will be cynical about whether the U.S. military really has the truth or not and that's always an open question.

But from what I saw and the people I met, I feel really good that the truth for all of us (not just Americans) in the educated, progressive, modern world that is trading with each other and creating untold amounts of value as technology keeps it accelerating. The truth is an outstanding asset, so it's really worth remembering that most of the people who are serving the military every day are out, pretty much helping the world.

A third insight was something that was consistent throughout the week, and that is the description from the top levels in terms of what the greatest threats are to the United States of America. So a quick quiz for you. I've got four countries and a fifth thing. You can ask yourself, in your own mind, what the U.S. military would deem to be the four countries, in ranked order that represent the greatest threats to our safety and stability.

I'm not going to editorialize on each of these. I'll just give you the list. The first one starts with an R. It's Russia. Russia is number one. Number two is China. Number three is Iran and number four is North Korea, a country that is not much bigger than the U.S. state of Mississippi. Those consistently, from one branch of the military (from the U.S. Armed Forces to the next) were all marching in line to the same concept, which shows that communications are effective from the Department of Defense. And generally it's nice to know that there is consistency in communication and we're all marching to the same beat throughout the Armed Forces.

The fifth is not a country. Some people might use the word terrorism. I don't like that term. The U.S. military doesn't use it. They use the term violent extremism. I remember, in particular, one of the generals saying, "We don't actually name who or what that is, because if we put a name on it, today" (let's say al-Qaeda), "that wouldn't be the same name we'd be using three or five years from now. It keeps changing."

So violent extremism. I know I'm speaking to many Americans, today. We do have a lot of international listeners, as well, for Rule Breaker Investing. But for us in America, and maybe your country, too, I think we're rather preoccupied with violent extremism. We worry about that a lot. When something goes wrong, the first question is, "Was that a terrorist thing?"

But the truth is, especially from the military standpoint, those are generally pretty under-resourced operations. They're not impressive, most of them. They don't really have that much in terms of forces, or technology, or really the ability to work together. So it's really these larger countries that don't always purpose freedom or seem to act in ways that you and I would say, "Well, that's a good citizen." Those are the things that the U.S. military spends the most time thinking about. That was a little bit of a surprise to me.

The next one up -- and I mentioned this earlier: The goal in the Middle East is not peace. That came from Gen. Votel, who's in charge of Central Command. He said, "We don't really use that word. In our lifetimes that's probably not achievable." It's a little bit Pollyanna-like, I might say (not Gen. Votel). He said, "The phrase that we use is stability and cooperation. That's really what we're aiming for in the Middle East. It's the most realistic thing we can achieve and it's a better way, sometimes, of thinking about what we want from that area of the world than the concept of so-called peace."

For the next one I have a couple of terms I want to define that I learned about last week. One is an acronym (because this is the military, after all). I'll cover that second. The first one is a term near and dear to us, here, for rule breakers and Rule Breaker Investing and anybody who's an investor (lots of us, here, at The Motley Fool) and that's the word risk.

Risk, in the military sense, is fundamentally different from how you and I use the word when we think about everything from investing to life. When I think about investing, I like to take risk. Risk is a good thing. I like that there's uncertainty about whether Netflix [would ever], back in the day, be bigger than Blockbuster. Or whether Google, back in the day, [would] ever make money as a free search engine. Those kinds of early questions.

And we see questions still like that today for a lot of the companies that we're looking at going forward. I like the risk that's inherent, there, where it might not work out. Our conception of whether Chipotle may or may not pull itself out of its operational and public relations snafus of the last year. Those are really interesting. And when I believe, and I put my money down, you and I become investors in those companies. We're taking risk and risk often equates with reward. So I can say more about risk. We've talked about it before, here. I know we'll talk about it in the future.

But from a military standpoint, this was really interesting to me. The concept of risk is fundamentally different because after all, if you come from the military, your goal is to protect [us]. Your citizens. Your homeland. If you take a risk and fail, it really hurts. You and I as investors -- the worst we can ever do is lose 100% of our money, and that's if we didn't do something silly like borrow money. Beyond that, take the crazy risk of leveraging and then losing it all.

Really, we can't lose much more than 100% of whatever that investment is. And if you're a capital-F Foolish investor, then you probably have, I hope, at least 15+ different stocks and/or funds. You're diversified (I hope not over-diversified), but if you're diversified, you can afford to lose. When you're operating at a national level, and you work in the military, you really can't afford to lose. So that concept of risk is much more about protecting downside and ensuring the ultimate downside never happens than any kind of real sense of upside to risk.

In fact, the way that I heard the marines (I think it was the marines) talk about how they train enlisted people is they're looking for "the ability to anticipate, communicate, and mitigate risk". The ability to anticipate it, to communicate it, share it out, and then to reduce it and mitigate it as much as possible. So any time I heard risk that week, I realized this is a fundamentally different concept than the one that I think about the other 51 weeks of the year.

And then one other term I want to define, and that's just this military acronym AOR. That's for area of responsibility. This is a pretty simple concept. You hear people use acronyms all the time. Occasionally we, as civilians, would say, "Let me stop you there. Could you just say what AOR means, because you just used it?" That was a frequent interchange that I and my fellow JCOC civilians had with military at all levels -- just asking them to stop for a second and explain the acronym they just laid out in front of us.

But area of responsibility. This is what you think it is. It might be a geographical area where somebody (a general or a battalion) has a responsibility. Or it might be an operational kind of responsibility. A more philosophical level. An abstract area of responsibility. I'm mentioning this one because I think it's kind of great. I saw the military make sure that any area of responsibility was owned. That it was clear who had ownership of that responsibility in that area.

And when I think about business, this is something I think we, as businesspeople, can learn from the military, as I mentioned earlier in the teaser to the show. I think that you should be asking yourself, your organization, for profit, not-for-profit [whether] all the areas of responsibility are owned. Do you have clarity within your organization in terms of who's basically on task for making sure that happens, or for making sure nothing bad happens?

Maybe it's that I grew up in an internet company. We're in our 23rd year and still building the plane as we fly it, but I think we, at The Motley Fool, sometimes (and even today, no doubt) have blind spots where we don't realize that that should have been an AOR, and so we need to designate the AOR. Maybe I'm speaking to you in your own organization. Do you know your AORs and do you know who owns them? It's very impressive to see it at the military level.

And speaking of things we can learn as businesses from the military, I had a really interesting answer from Gen. Votel. Again, he's the head of Central Command, so he's overseeing the 20 countries, that theatre of operations that are in the Middle East. I asked him at one point, in so many words, "What sort of a disruptive, rule-breaker-type thought do you have in terms of ways that you could improve the military or your life? I don't know your life, at all," I said. "I don't know your context, but as a rule breaker, myself, I'm always looking to go against the conventional wisdom and trying to figure out how we can do something better, special, different than we did before."

And he said (and again, I think this applies to business), "We have a problem organizing to solve problems. We tend," he says, "to organize geographically." And he doesn't just mean the military, although it does divide up the world into different geographical theatres or bases of operation. But he said with the government, as well. The government and the military have a hard time solving some of these really thorny problems that have persisted. How about the conflict between Israel and the Arab world?

And he said it's further complicated because you have a lot of different hands in the pot, here. You've got an ambassador to the country, so from a diplomatic level, you have somebody who's trying to be a solution. You have regionally focused entities. Some of them are NGOs (nongovernmental organizations) that are tasked or have tasked themselves with aiding and abetting disenfranchised people, or feeding the world. So you have regionally focused entities. You also have, certainly, the same type of military operations. You have intelligence in place, where you're trying to gather and understand what's happening, there. And then you also have, of course, the U.S. military, in our case.

So you have a lot of different constituencies. Congress, as well, which oversees the military. He said (and I like this point), "It's really hard to work interoperably together." He said, "Ideally, if we could, we should," he said, "organize to solve the problem rather than organize geographically or by turf."

And isn't that a great lesson for businesses, as well? Some of the best businesses haven't said, "We're going to fix this in this state, or in this country, or in this industry." They just think about you and me as consumers, and how they can make our lives better. Often it's just a question of trying to solve problems.

[That's the question] a lot of our tech group, here, at The Motley Fool ask as they do tech buildouts and think about how to improve our website. Specifically they'll ask us, before we make suggestions of a new product or features, "What problem are you trying to solve?" And I think the more that we, especially at a global level, can do that (the more effective [we are at] channeling Gen. Votel), the more effective we can be, so a thought.

The next one I have for you is a horse of a completely different color. This was an insight. As it turns out, aboard the USS George Washington Aircraft Carrier, I learned that the anchor is not really an anchor. If you ever tour an aircraft carrier, you'll maybe get to go to the forecastle, or the fo'c'sle in Naval parlance (the abbreviation of the word that has been used by sailors for a few centuries). You go to the fo'c'sle and you'll see the anchor.

And in the case of an aircraft carrier, you'll see the huge, huge links (each one the size of your torso and weighing well more than your torso, I hope, because they each weigh about 250 pounds). So when you really think about it -- when you think about that chain being about 1,000 feet long in the case of the aircraft carrier -- you'll realize that the real anchor is the chain links itself. The little thing on the end doesn't hold down an aircraft carrier, as well, so the anchor isn't an anchor. It's the chain. Just an interesting, fun fact.

Speaking of fun facts, I am a fan of the Amazon Echo. I do speak to Alexa on a daily basis. For anybody who has the Amazon Echo, I recommend it. And one of the fun things I discovered recently you can do with the Amazon Echo is you can say, "Alexa, give me an interesting fact." I do that a couple of times a day, and Alexa comes up with things like the one I just told you. Now the anchor point was from my own experience, but that's an interesting fact and there are a lot more that we can learn if you're an Amazon Echo user.

The next one up. I mentioned earlier that I was going to tell you the secret behind why the U.S. military thinks it will keep on winning, and you've waited until the 20th minute, or so, of this podcast so you're entitled, now, to know the answer to this secret. This is through my own observation, but it was reinforced at a few points by people who are training the military.

And here, as I see it, is the U.S. Department of Defense's great advantage. Not to speak for it, but I think that they would recognize this. And that is that today in the United States of America, we are an all-volunteer force. Everybody who's serving in any of the five U.S. Armed Forces has chosen to do so, and we are regularly confronting threats in which that is completely not the case.

Of course, we've heard of some horrible cases where people have, in the worst cases, bombs strapped to their bodies, and they're not even part of whatever is about to blow them up. But I'm thinking more in terms of the authoritarian regimes in which people, there, are not choosing to be there. And if you think about not just the decision to choose or not to be recruited by your military, but you actually think about how people are commanded, there's a really fundamentally different vibe happening in the U.S. as I saw it than I think many of the enemies in the world at large.

That is for the most part, the U.S. military is teaching autonomy to its leaders. They want you to be, whether you're in charge of a large or small force, pretty able to act on your own, without getting orders from somebody higher up. Of course, there are a ton of orders, and the U.S. military is very process driven. But fundamentally, they're teaching leaders, especially just of very small units, to operate as autonomously as possible. I'm going to throw in another word there which I heard last week, and that is creatively as possible. Encouraging creativity for on-the-ground forces.

If that's well done and well achieved (I think it generally has been in the U.S. military), that is very powerful relative to any enemies or threats in which that is completely not the case, and I'm happy to say that for some of our biggest threats identified earlier in this podcast, that is not the case. They do not have that kind of autonomy or creativity being taught, or grown, or expected of people serving in the military.

I see that as a secret, and it's one of those that we're probably even happy to allow to get out because, like a lot of great secrets, you can hear it, even if you're a competitor, but it's very hard, in many cases, to do it unless you fundamentally restructure your culture or your operations, and I don't think that's happening anytime soon.

Just a few more and then we're going to get to our Mailbag and a couple of your financial questions. I mentioned earlier that I wanted to give you a public speaking Q&A best practice. I saw this happen a few times and I think, in particular, of Lt. Col. Joseph Shusko (who I mentioned last week, who teaches the marines martial arts), but I also saw it in Gen. Kenneth Tovo, who is in charge of the United States of America Special Operations command. Both of them would do this every time they answered a question.

They would say, "Did that answer your question? Great." And the next person they would ask, "Did that answer your question? Good." Every single time asking at the end of a Q&A, "Did that answer your question?" Giving the person who had asked the question opportunity to say, "No, not quite."

Imagine if this ever happened on television when everything from politicians to CEOs are being asked questions on a regular basis. They're regularly not answering the question. Of course, they would therefore not at the end of their answer say, "Did that answer your question?" Imagine what a better world it would be from a public discourse standpoint, if everybody did what I saw the military leaders regularly do, which is at the end of every A, to every Q, to ask simply, "Did that work for you? Did that do it?" Awesome.

And I'm going to close it out with just a few insights that I saw from hearing and learning how Special Forces are trained in the United States of America.

The first thing I want to say about it is it's a very selective process. I think everybody knows that. A tiny percentage of people who actually apply to be a U.S. Army Ranger ever get to be. There is, as you'd expect, the physical requirements and demand. At a minimum, you have to be able to do things like 59 sit-ups, 49 push-ups. Then you have to run a few miles in a short time and then finish it all out with some pull-ups. So yes, there are those physical requirements.

But what was really evident to me is how those almost take a back seat, even in the U.S. Special Forces, to [one's] intellect and character (almost moral characteristics, which they're constantly looking for). In fact, they said their selection process has only slightly changed since 1989. Think about how many other things in the world have changed, including all the technology and equipment that the military uses since 1989, and yet the actual process for selection is still mostly the same.

Here are a few of the things that they'll do. They'll have you start running, and they won't tell you for how long you're running. You just have to run. They say run, and you run. So there's ambiguity in terms of what's going to be asked of you, and you should probably expect they'll stress you out. They'll frequently have you do a lot more than you ever thought you would have had to do when they first told you just start running.

So not telling you what you're going to do. Not telling you how you're doing. Not giving you any feedback in terms of whether you're doing a good job or not. In fact, I found it fascinating. A part of the test for the Army Special Forces involves not telling you that you were right or that you were wrong as you go.

As you're collaborating, sometimes, with other recruits, and you're having to orienteer yourself in darkness, and figure out how to get from there to somewhere else, to somewhere else, starting at 2:00 a.m. in the morning and needing to be done by noon later that day; there is no right or wrong. They'll say there are only consequences for the decisions that you're going to make.

It's interesting they do an IQ test, and what they've consistently found are the people who end up in Special Forces have an IQ that is between 102, at the low end, and 130. I think most of us in the U.S. know that an IQ test normalizes at 100, so 100 is average intelligence. Below 102, you're probably not mentally fit enough to be a Special Forces guy or gal, but if you're over 130, you're probably also not well set up to be in U.S. Special Forces. They said too often among those people there's too exact a need to be right. It just doesn't quite work.

The final note from the Special Forces selection is 70% are introverts, maybe not what a lot of us would expect. So a fascinating process to weed out physically and emotionally who's going to be Special Forces and I learned a lot and saw a lot from those people.

That's it for the military. In fact, that's probably it for the history of this podcast when it comes to talking about the U.S. military. The stories that I have I will perhaps have an opportunity to refer to -- many I didn't even tell these last two weeks -- in future weeks and months of this podcast, but any kind of formal think through of what we see and what's happening in the U.S. military will not happen anymore, probably, on Rule Breaker Investing.

I asked [a question of] a new friend of mine, Wesley Burks, who is the executive dean of the UNC Medical School, who was on my team for the JCOC. I said, "Wesley, what was a reflection you had?" He said, "I think many of us, when an occasion arises (say a ball game, a graduation exercise, or a similar event) rise to honor the military, and clap with the others, but it's more in the way of just doing what we think we should be doing," Wesley wrote me, "to honor the military. The week, though, changed me," he wrote, "in that I will never do that again. My applause, my standing to honor them will be truly genuine and for me a meaningful response. I hope that makes sense."

And yes, Wesley, it does make sense to me. I hope it makes sense to anybody listening. After reviewing some of these thoughts over the last couple of weeks (and I know many of you have worked or do presently serve in the military), you already get it.

I really enjoyed this opportunity to share what I saw with you. I said as a fellow taxpayer I felt an obligation to let you know, since you, in part, paid for my trip what I saw and what I think, and if in future Mailbags, or on our Motley Fool discussion boards, anybody wants to ask me more about any of this (even out there on Twitter -- I'm @DavidGFool) you're more than welcome to. Time to move on.

This was obviously a long podcast, so I'm going to go with just two quick questions to close. Two questions from our Mailbag this week. The first one comes from Linda Queen. She's @goldengirl2362 on Twitter. She said, "A follow-up question from a previous Mailbag: investing in thirds or adding to winners. Is there a difference?"

Well, let me, first of all, redefine our terms, here. When we talk about investing in thirds, that's this concept that when you're ready to buy a stock, rather than put all your money in that stock right away, you divide your money up into thirds. You buy some right now with your first third, your second third a little bit later after that, and your third and final third after that.

And the reason that we, at The Motley Fool, have championed this approach to investing is in my experience, a lot of people have a hard time buying a stock. They might think: "Starbucks. It does sound like a good company. I know it's been around for a long time, but it just looks expensive. I worry the market's going to drop this fall." All that kind of thinking. And for us as coaches for this kind of mentality, we think it's a great thing to take your money and just put a portion of it in right now. Invest that third.

And then maybe a month from now -- you could be clockwork about it -- you could say exactly a month from now, or at some future date, you invest that second third, and your third, third, and now you've made your full investment and you didn't subject yourself to worry and stress around a single date when you went in all or nothing with that stock. Fully buying or fully selling. So investing in thirds -- I want to make sure I define my term -- that's what Linda was asking about. She said, "That or adding to winners. Is there a difference?"

And yes, Linda, there is a key difference. Investing in thirds is a tactic and adding to winners is a philosophy -- a Foolosophy, if you will. Both are good things. Investing in thirds I've already covered. I think it's a mental crutch for a lot of people, especially newer investors who have a hard time committing to a stock.

But studies will show, as we talked about during the last Mailbag, that it's an inefficient way to invest. Since the market tends to go up over time, you actually net-net lose money by waiting with that second and that third, third. However, from a psychological standpoint, for many people it's the difference between investing at all or not at all. That's why we've always favored it. It's a tactic, though. It's not something you or I have to employ.

Now adding to winners, by contrast, is a philosophical way of thinking. What does unite both of these concepts, even though I'm drawing a distinction between them (tactic versus a philosophy) is they are both capital-F Foolish. That is to say both of them, in my experience, go against the conventional wisdom.

Most people think you have to go all in or all out. Buy all or sell all. But the truth is you can be incremental. That's very Foolish, and also very Foolish for me is this idea that you would add not to the things that have dropped in value. Not trying to, as we sometimes say "buy low and sell high." But, no, instead you are consistently adding money to things that are working. The stocks that are performing well. The companies that are doing well. To me, that's the real winning approach over time. And again, it goes against most people. Most casual investors as they think about how to invest and what works out there in the markets. Linda, thank you for your question.

And the last one this week comes from Andrew. He's @Captain_KillJoy. That's a pretty good Twitter handle. Andrew, you asked: "How do you interpret stock valuation with things like negative P/E or negative book value?"

A great question. In other words, when a company doesn't actually have earnings or positive book value (I'm not going to define book value, here) and basically when you're just not seeing things that give you normally positive ratios, how do we actually invest or think about those things?

For me, my best fallback for the many early and disruptive, emergent companies that sometimes don't have earnings, yet, is to look at the top line, and that is sales. If you look at sales -- let's just pretend the company has $100 million in sales and is worth $2 billion, today, on the market. That is a very expensive ratio. That's about a 20 to 1 price-to-sales ratio.

So the price-to-sales ratio is a good thing that can ground you and help you understand how any company might compare, by this metric, with any other company because even though many companies may not have earnings, almost all of them have sales, today, so you can compare valuations using that metric.

Now typically, what I'm looking for are companies that are between 3-10x sales. You can find companies who trade below the value of their own sales. These are very distressed situations where companies may have $1 billion in sales, but be worth only $500 million. That's a really interesting situation. They're very distressed. I'm not that interested in those.

You can also find companies that are trading at well more than 10x sales. A company like Twilio, today, is trading at a very high price-to-sales multiple. I like to find that 3-10x sweet spot. In general, companies that trade at higher multiples of sales are more attractive companies in the market's eyes. We're willing to pay 7-8x sales. These are usually finding the premium-priced things like premium-priced jewelry at Tiffany, or premium-priced coffee at Starbucks. You're finding, usually, quality companies. That's my sweet spot. It helps you in situations where there is no price-to-earnings ratio.

Well, that was quite a motley podcast. My apologies, a little bit, for the length of this one and for losing my normal focus for these two weeks of money and investing. Next week we're going to get right back at it. I'm going to have five new stock picks and I'm going to be reviewing my first five stock picks ever made on this podcast.

It was one year ago this upcoming week. It was "5 Stocks for the Next 5 Years." You can go back and listen to it, if you will. I will be updating where those stocks are one year in because I love to keep score. It helps me up my game. So a review of five stocks next week from last year, and five new ideas for the year ahead.

In the meantime, Fool on!

As always, people on this program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Learn more about Rule Breaker Investing at