One of the great joys of teaching is watching a student really absorb the roots of a lesson -- not just a particular set of facts but fundamentals and processes that they'll be able to apply again and again. And while Motley Fool co-founder David Gardner might not have a classroom, there's no doubt that he does view himself, in part, as a teacher. It's not for nothing that the company's original motto was "Educate. Amuse. Enrich." Today, that's been updated to "Making the world smarter, happier, and richer," which obviously hits the same themes.
Earlier in May, the Motley Fool asked our Twitter followers, "What investment principles and ideas have you learned from David Gardner?" The answers were so gratifying to Professor G. that he's dedicating an episode of his Rule Breaker Investing podcast to a quick refresher course on those lessons. In this segment, he's happy to see that longtime listener Kurt has been paying attention to three of the principal Rule Breaker themes.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on May 22, 2019.
David Gardner: Kurt, what have you learned from me? Well, you said, "In order to beat the market," and then you have three bullets. The first: "invest in disruptive companies since Wall Street doesn't know how to value them." Second, hold for the long term since Wall Street doesn't look much further than next quarter." And third, "diversify, knowing that half will lose money, but the winning half will more than make up for it." Really, a lovely recitation of probably three of our principal themes in Rule Breaker Investing. And not just Rule Breaker Investing; that runs through a lot of The Motley Fool oeuvre. Yep, that's French. I remember that. My schoolboy French. That's the work of The Motley Fool. Yeah, those three principles run through a lot of our oeuvre here at fool.com, and always will, for really good reasons, because it wins, and it works.
Investing, as Kurt says, in disruptive companies, because, yeah, Wall Street didn't know how to value Amazon in its early days, and arguably, 10 or 20 years later, still doesn't know how to value Amazon. That's why the stock has made so much money for us. Or companies like Netflix, they're just so disruptive. Even America Online back in the day. So disruptive that people could not -- Facebook -- could not understand what they were going to become. Google. And so these stocks are consistently viewed as overvalued, and so people don't buy them. But you and I do, and then we hold them, to Kurt's second point, for the long term, because Wall Street isn't going to. It's not going to look much further ahead than next quarter. And finally, as Kurt says, we diversify. While I might have a small quibble with what Kurt said -- he said knowing that half will lose money; I don't think half of your picks or mine will lose money. Half will lose to the market averages. But if we're actually finding really good companies that reflect our best vision for the future, and we're spreading it out, in my experience, you're going to make money with well more than half. But, sure enough, a number will lose to the market, will be wrong and lose some money. But the key here is, your winners will wipe out all of the mediocrity, and more so. So, diversifying over the long term into these disruptive companies, as Kurt has summarized, that has proved so successful for us at Motley Fool Rule Breakers, and I know for so many of you, my fellow Rule Breakers out there in Podcastville.