In this Rule Breaker Investing segment, Motley Fool co-founder David Gardner gets political -- but not the way most commentators have in this contentious election season. Instead, he harkens back to the classic writing of Charles Dickens and the The Pickwick Papers. For anyone who believes that our current extremes of party polarization are breaking historic ground for divisiveness, think again. Instead, let investing and the principles behind it give you a little bit of comfort this year.
A transcript follows the video.
This podcast was recorded on Oct. 19, 2016.
David Gardner: We're going to start in 1836 this week, because there was a wonderful novel that was written by a very well-known British author whose name you'll instantly recognize when I mention it. It was the first of his many novels written in 1836 and I'm going to read a little bit from one of my favorite chapters of that novel in this podcast.
Now, I'm not going to read that much, but this is a passage that comes back to me every four years, right in line with the political cycle, and I didn't have a podcast four years ago. So here I am, now, for the first time getting to share it with you. It's going to be a pleasure. And I'm going to start right there.
So we're going to cover a number of things in this podcast, but I want to start with The Pickwick Papers by Charles Dickens. His first novel. A comic novel. Pickwick, the protagonist, is an older gentleman with spectacles. He's pretty well-to-do and he is the founder and eternal president of the Pickwick Club (for those of you who know the novel), and he and a few members of the Pickwick Club make a point of going out into the English countryside, from time to time, and having experiences to learn more of the world and then report back on them through the Pickwick Papers.
Charles Dickens, who was only 24 years of age when he wrote this novel in serial form is, of course, the real star of the show, but it's all through the eyes of Pickwick and not even to a lesser extent, his valet Sam Weller. His valet who is very comic.
And really the beauty of this novel -- and why I enjoyed reading it a few decades ago when I first read it -- is just the great, comedic characterizations which Dickens proved himself so well at doing throughout his whole life, but it was very much on display with his very first novel. Intentionally a comic novel from an author, of course, who later in his life would often write very serious dramas.
So if you were to go to Chapter 13 of The Pickwick Papers, you would encounter Pickwick and Sam Weller visiting the town of Eatanswill. Now, in modern-day parlance, most people who know this novel better than I (the academics, the critics), would say this was Sudbury back in the day, if you care. But he's in Eatanswill and he encounters a town divided. So I'm going to share with you, over the course of this podcast, three paragraphs at different points from this novel, but here's the first one.
"It appears, then, that the Eatanswill people, like the people of many other small towns, considered themselves of the utmost and most mighty importance, and that every man in Eatanswill, conscious of the weight that attached to his example, felt himself bound to unite, heart and soul, with one of the two great parties that divided the town -- the Blues and the Buffs. Now the Blues lost no opportunity of opposing the Buffs, and the Buffs lost no opportunity of opposing the Blues; and the consequence was, that whenever the Buffs and Blues met together at public meeting, town–hall, fair, or market, disputes and high words arose between them. With these dissensions it's almost superfluous to say that everything in Eatanswill was made a party question. If the Buffs proposed to new skylight the marketplace, the Blues got up public meetings, and denounced the proceeding; if the Blues proposed the erection of an additional pump in the High Street, the Buffs rose as one man and stood aghast at the enormity. There were Blue shops and Buff shops, Blue inns and Buff inns—there was a Blue aisle and a Buff aisle in the very church itself."
Before I say something slightly more important about that paragraph, I would like to point out that Dickens properly uses the original meaning of the word enormity in that paragraph. It's just the pedant in me can't not point this out, but you'll often hear people talk about the sheer enormity of, let's say, the United States of America. And what they think they're saying is the enormousness; the size.
But really if you go back and look at the original meaning of the word enormity, before it got corrupted by a lack of understanding, it was "the great wickedness", and so I certainly wouldn't want to talk about the enormity of the United States of America. So, anyway, Dickens, when he says, "rose as one man and stood aghast at the enormity" ... he nailed it.
Ah, but let's talk about why I'm really sharing that paragraph with you. So what I love about that paragraph is to me, it satirizes (and sadly often describes) what happens in party politics, which is that you have one side and then you have a second side. And all the people on the one side rise as one against whatever's happening on the other side. And this is the nature, I think, of party politics and in the United States of America, and we're not the only country in the world like this.
We have a fairly mature set of parties, and those of us who don't count ourselves in either one of them have probably felt marginalized over the course of the last few decades and I'm one of those people. But I think that if you do feel marginalized or you stand outside it, it's comic with Dickens to look at the Blues and the Buffs (the Democrats and the Republicans) and see how they behave; and see how it's really just the nature of the beast, itself.
So a fair amount of what I want to talk about today is how much I love business, because business (which you and I get to invest in as stock market investors, which is the primary focus of Rule Breaker Investing ), is a win-win-win. In contrast to the city that I've grown up in (my native city, Washington, D.C.) where since my birth, since my early days and every day, I see the Blues and the Buffs go at each other.
In contrast to a system that pits people against each other, business only works when an entrepreneur starts something, the business ends up selling something (a product or a service), and at a price that people are voluntarily willing to pay for as customers, and those customers end up providing prosperity back to the best businesses, because they buy from them repeatedly, and they pay.
And here's a key -- they pay above the costs of the business. They allow the business to earn a profit. And businesses, themselves, then use those profits, in part, to have successful stocks that you and I, as investors, can buy and hold; so we have an opportunity to get a free ride if we're just the investor part of it.
But let's go back and look through that again. We've got an entrepreneur and employees working hard to please people. They're competing against others trying to outdo their fellow businesses at pleasing you and me at prices that we're willing to pay. We have you and me, the customers. We're buying from this one, not that one. We're choosing this product, not that one because we value it. No one's forcing our hand to buy anything in most cases in the United States of America today.
And when we do, we're paying above the costs, and those businesses then earn profits, which they can use to reinvest in themselves, pay dividends back to shareholders, and ultimately the value of their stock, which we hope will rise over time, is driven by their ability to earn and grow profit.
It's a beautiful system. And yet, as is often said, it's not a great system; but it just so happens to be better than any of the much worse systems that have thus yet been invented by humanity in terms of the best way to govern ourselves. Capitalism when done well -- and it is done so well, so often -- and we should remind ourselves of that. All of the companies that we talk about on this podcast are examples, exemplars of doing business well and right, and they really are the underpinnings of our society, at least in my opinion.
So during a time in which it would seem to be all about the Blues or the Buffs -- who's going to win -- I've said sometimes in the past I believe that politics makes us worse. You end up pitting countryman against countryman when I think we all share so much more in common than really we feel apart. And I think we need to hear that and be reminded of that in 2016.
